Lotte Mart does not falter in the face of “planned” heavy losses
Lotte Mart does not falter in the face of “planned” heavy losses
South Korean giant Lotte Mart’s accumulated losses hit VND800 billion at the end of 2017. VIR’s Bich Ngoc talked with Jeong Seong Won, chief financial officer of Lotte Mart Vietnam, on the company’s development strategy and its views on its losses.
In light of your reported VND800 billion ($35.2 million) losses, will Lotte Mart withdraw or at least reduce your investments in Vietnam?
No, we will not withdraw or reduce investment capital. Lotte Mart is committed to long-term investment in Vietnam, so there will be no backing down. We anticipated difficulties in the initial stage of investment, however, with the strong potential of the parent company in South Korea, we will continue to develop, invest, and do business in Vietnam. All issues so far have been calculated into the long-term investment plan of Lotte Mart in Vietnam.
We heard that Lotte Mart has reduced its investment capital in China. What is your investment strategy in Southeast Asia? What role do you envision for Vietnam in Lotte's investment strategy?
In our view, Vietnam is the most promising retail market in Asia, for a number of reasons, such as the young labour force which makes up the majority of the population, the increasing urbanisation not only in the major provinces and cities, but also in junior provinces, which have been actively developing their infrastructure system.
The country has also been narrowing the area of agricultural production and widening industrial and service trade. All of this restructuring is attracting investors. Therefore, Vietnam is considered a suitable destination for Lotte Mart in the coming time. I may say that Vietnam is in the long-term visions of Korean enterprises.
Lotte Mart is currently experiencing losses at some of its centres, such as the one in District 11, Binh Duong, and Dong Nai province. How will you improve business efficiency in these centres or will you close them to restructure investment flows?
Truth be told, the losses in the above-mentioned commercial centres were beyond our expectations, but are due to outside reasons (such as changes in the investment plan). This is a great challenge for us. We need time for our on-going development plans to yield fruit and to make these centres operate efficiently and profitably.
The idea of closing down these centres has not even occurred to us, because we think that profitability is only a matter of time. Measures to improve, renovate, and earn experience from inefficient business will be deployed to help these centres operate effectively and contribute to the overall business results of the company.
We hope that with our continuous solutions, along with the completion of the plans from the government, these centres will soon operate more effectively.
Lotte Mart has also set the target for profitability by 2020. Please clarify, based on what data did you come up with this forecast?
Over time, we have been trying to improve the effectiveness of these centres and learn from our experiences in opening new centres. Recently opened centres (like Lotte Mart Go Vap in Ho Chi Minh City and Lotte Mart Nha Trang) have been operating very well.
These good results have been cutting down our accumulated losses each year. We expect that by 2019 we will start to generate operating profit, helping Lotte Mart’s operation become more lucrative and more efficient in Vietnam.
The potential of the Vietnamese retail market is clear, however, what challenges does Lotte Mart see for investors in general, and your company in particular?
The Vietnamese retail market hold great potential. However, retailers have to deal with many challenges when investing. There is tough competition and consumption habits vary by region.
At Lotte Mart, we have learned many lessons from the opening of our new centres: the efficient model needs to be convenient, customer friendly, and meet the increasing demands of consumers.
How does Lotte Mart plan to promote business in Vietnam?
At present, we are making strong investments in the field of e-commerce through our online mobile application so that customers can shop and order goods conveniently through smart phone. This is an already budding trend in the retail industry.
In addition, we will also renovate, improve, and restructure ineffective centres, and will invest more into facilities and products and services to attract customers. We want to better connect with customers in Vietnam, the same way we did in our home country, Korea.
