Lotte jumps into Shanghai retail

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Lotte jumps into Shanghai retail


The Citic Square building in Shanghai, left, and the Citic Square Mall, right, which takes up the first to sixth floors of the building. [LOTTE DEPARTMENT STORE]

Lotte Department Store has signed on to a joint venture with Citic Group, a state-owned Chinese company, to operate a shopping mall in Shanghai and to build three more in the region between 2017 and 2019, the Korean company announced Monday.

The joint venture will operate the already-existing Citic Square Mall in the bustling commercial district of Jing’an on West Nanjing Road. The mall is currently run by Citic Group, and Lotte’s participation in the joint venture with the Chinese company will allow the Korean retail giant to step foot into the Shanghai market without having to navigate through China’s byzantine business regulations.

Lotte will hold approximately 49 percent of the joint venture’s shares and will focus on operations, while Citic Group will help with property development.

The partnership was first offered by Citic Group, which makes 60 trillion won ($52.6 billion) in annual sales from financial services, energy and property development. “In China, companies in property development have started to launch businesses in retail because they already have the land to build new facilities,” a Lotte Department Store spokesman said.

Although Citic Group is an influential company in China, it lacks expertise in retail, as it wasn’t the group’s main business in the past. Competition is also tough, as Shanghai is currently home to over 50 department stores and 80 shopping malls.

Lotte Department Store, on the other hand, already has five branches across China and has experience with merchandising, store design and employee training in the country. Sales at Lotte’s five department stores rose 28 percent last year from the previous year.

The Korean retail giant said it plans to use the partnership to create more opportunities for Korean brands to enter Shanghai. Consumers in the metropolis have shown particularly high interest in Korean popular culture, making it a good starting point for Korean fashion companies looking to set foot in China.

“We believe the partnership with Citic Group will strengthen our stance in the Chinese market,” Lotte Department Store CEO Lee Won-jun said. “Our plan is to use this opportunity to help other domestic companies with potential to expand to China as well.”

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