Online malls catch up with offline stores

Big changes are under way in the retail market. Since its opening, Lotte Department Store’s flagship Myeong-dong branch has been considered the nation’s benchmark shop in terms of revenues: This year, it expects sales of 1.15 trillion won ($1.1 billion). Now, however, Lotte faces a dangerous new rival ― electronic arriviste Auction. The online trading site announced yesterday that as of Sunday, it had surpassed 1 trillion won in sales: a first for an online shop. The achievement is surprising ― or rather alarming ― to off-line retailers, since the Web site began services only in 2000. Lotte Department Store’s Myeong-dong store took 20 years to break through the 1 trillion won barrier, while LG Home Shopping, which is based on television sales, saw 1 trillion won in revenue only after six years in the game. Trade volumes on Auction have been continuously on the rise this year, while the rest of the distribution market has been struggling. Its first-quarter sales were 248 billion, going up to 277.5 billion won in the second quarter and 286.2 billion won in the third quarter. At this rate, the company expects 1.1 trillion won in total transaction value by the end of this year. However, what constitutes a sale depends on what area the companies specialize in, said Yoo Hee-chan of Samil Pricewaterhouse Coopers. As a result, he said, it is difficult to compare Auction’s sales directly with department store sales figures. For example, Auction generates profits off the commissions from transactions through its Web sites. If the sales of Auction were to be calculated purely upon commissions, sales for this year are expected to be about 100 billion won. Auction’s president, however, argued that the two outlets are comparable because department stores receive commissions from the brands they offer. “One is operating online and the other is operating offline,” said Auction’s President Lee Jae-hyun. “That’s the only difference.” Men were a major factor in Auction’s success. Compared to last year, male shoppers exceeded female shoppers by almost two times, in terms of total sales so far this year. The stuttering economy has also helped. “Consumers are getting familiar with the concept of buying products through the Internet,” said Mr. Lee. “The bad economy has also been something of a factor for us, since people want to save every penny.” by Yoon Chang-hee, Wohn Dong-hee