Tough competition in store for retail outlets

Local department stores are expected to engage in fierce competition as they open outlets in an up-and-coming commercial area in southwestern Seoul.

Hyundai Department Store last week opened an outlet in Gasan-dong in southwestern Seoul near the edge of Gyeonggi, and Lotte Department Store plans to open an outlet eight kilometers (five miles) from the Hyundai store later this year. The Lotte Outlet will be located near the Gwangmyeong KTX Station, where Ikea’s first branch is also scheduled to open in December.

Adding to the list of retailers, Shinsegae Simon, a joint venture by Shinsegae Group and Simon Property Group, said last month it will open a premium outlet in nearby Siheung, Gyeonggi. Shinsegae Group operates Shinsegae Department Store.

Hyundai’s new outlet occupies a 39,000-square-meter (9.6-acre) area and has nine floors selling 230 brands. In an effort to differentiate itself from its competition, Hyundai said its strategy is to provide customers with a shopping environment that is similar to a department store. The building has an underground parking area for about 1,000 cars and the store will allow customers to use Hyundai Department Store gift certificates.

“Although we opened an outlet, we wanted to create a pleasant cultural space,” said an official from Hyundai Department Store. “There are also popular brands like Obzee, which can be seen at department stores. I would say we opened an outlet very similar to a department store.”

The Gasan-dong area where Hyundai opened its outlet has been a fashion town since 2001 when several retailers opened outlets such as the Mario Outlet and W-Mall. Mario Outlet has 600 brands and more than 100 million customers have visited the shopping facility. It also has a tax refund service for tourists.

The W-Mall, which opened in 2007, is located opposite Mario Outlet. Last year, it made 300 billion won ($291 million) in sales. The fashion town was officially formed after the two outlets opened, and in 10 years, it became a commercial hub where about 800 billion won in sales is done every year. About 200,000 customers visit the area on weekdays and 300,000 people go on weekend days.

Hyundai Department Store said it aims to raise 200 billion won in sales per year at the store.

“More consumers are expected to visit the fashion town with Hyundai Department Store opening an outlet based on its brand power,” said an official from W-Mall. “We also expect new customers to visit from not only the nearby areas like Geumcheon, Guro, Gwangmyeong, Gwanak, and Yeongdeungpo but also from distant regions.”

Hyundai Department Store, however, isn’t all smiles. More of its rivals are expected to bring competition by moving in nearby.

Another commercial area is located just a 15-minute drive away from Gasan-dong, which is where Lotte will open a 28,000-square-meter outlet near Gwangmyeong KTX Station later this year. Ikea, a global home furnishing company, will also open later this year while Costco is already operating there.

When Lotte’s outlet store and Ikea’s first branch in Korea open near Gwangmyeong KTX Station, the competition will kick off between Gasan fashion town and Gwangmyeong.

Retailers in Gasan-dong are concerned because their main customers include residents of Gwangmyeong and Gyeonggi.

Lotte has high hopes that visitors to its outlet will get a one-stop shopping service after Ikea opens in December. Ikea is expected to sell more than 9,000 items including furniture and home decorations.

Other retailers are opening more outlets in an attempt to break their sales records.

Lotte Department Store, for example, opened its first outlet near Gwangju World Cup Stadium in 2008 and in the next five years it opened nine more outlets. In the first year, Lotte raised 33 billion won in sales, but last year, its sales jumped to 1.5 trillion won. This year, it expects sales to reach 2.3 trillion won.

BY CHAE YOON-KYUNG, LEE EUN-JOO [angie@joongang.co.kr]