Hanssem synergizes with Lotte brands after IMM investment

A Hanssem Design Park store, which opened last year at Lotte Maison, a living specialty store located in Busan. [HANSSEM]

Hanssem, Korea's largest furniture company, is starting to work more with Lotte Shopping, a major shareholder, and other related companies.

Earlier this year, Lotte Shopping invested as a limited partner in a fund established by IMM that acquired 37.8 percent of Hanssem.

Lotte Shopping owns stakes in Lotte Corp, Lotte Hi-Mart and Lotte Confectionery and is itself owned 40 percent by Lotte Corp, which has stakes in Lotte Food and Lotte Chilsung Beverage.

Companies sharing the Lotte name and Hanssem have formed 15 consultative bodies to discuss ways in which they can work together. It is the first such discussions since the private equity fund acquired a stake in Hanssem.

"Currently, we are holding meetings once a month and additional occasional meetings according to projects and agenda items to discuss a wide range of projects, ranging from short-term cooperation between existing stores to mid-term cooperation projects that require one to two years of time, such as joint opening of businesses and new business planning," a spokesperson from the consultative bodies said.

A particular focus is working together on e-commerce and membership programs.

Hanssem participated as a sponsor in the KLPGA Lotte Open, a golf competition, held from Thursday. Previously, Hanssem did not market through sports events.

Currently, 15 large Hanssem stores are located in Lotte Department Stores, Lotte Malls and Lotte Marts. The consultative bodies are reviewing plans to open Hanssem Nexus luxury imported furniture stores in Lotte Department Stores and open Hanssem's first store at Lotte Premium Outlets. Hanssem's living and furniture products will be sold through "Lotte On." They will developed integrated data using Lotte membership programs.

Related companies in the construction, logistics, rental and hotel business are participating in the councils, so Hanssem interior furniture could be used in Lotte Hotel rooms or in Lotte Castle apartments. Hanssem mattresses may also be used.

"During the Covid-19 pandemic, people have opened their eyes to the importance of time at home and the value of interior design," said a Lotte spokesperson. "There will be ups and downs in the market, but the growth of the living sector will continue."

The furniture market itself is growing fast. According to the Korea Research Institute for Construction Policy, the domestic home remodeling market, including interior design, grew from 14 trillion won in 2018 to 18 trillion won last year. It is expected to exceed 25 trillion won by 2026. This is an average annual growth rate of 7 percent.

Reputations of furniture brands are becoming more important in the remodeling and interior design market. Currently, 22 percent of domestic kitchens, 24 percent of bathrooms and 70 percent of windows are brand products. "In the future, companies with brand recognition for each major item will increase their market share," said Kang Kyung-tae, a researcher at Korea Investment & Securities.

"The domestic living market is being reorganized around interior remodeling," said a retail industry source. "If the collaboration between Hanssem and Lotte becomes visible sooner than expected, the two companies with high recognition in each field will be able to create a lot of synergy."

In the first quarter, Hanssem's sales were 525 billion won, down 4.9 percent from the same period last year, and net profit was 42 million won, down more than 60 percent. This is mainly due to a decrease in housing sales transactions, which have a direct impact on demand for interior design and furniture. Strengthened real estate regulations and an increase in the price of major raw materials, such as wood, contributed to the decline of real estate transactions.

Hanssem shares are down 31 percent over the past year and 63 percent over the past five years.

LEE SO-AH [lim.jeongwon@joongang.co.kr]