Extraordinary Endeavors in Turbulent Times: Asian Innovation, Inclusion, and Impact during COVID-19

ASIA BUSINESS COUNCIL HONG KONG UNIVERSITY OF SCIENCE AND TECHNOLOGY 59 Lotte Group (South Korea) Extraordinary Endeavors in Turbulent Times Previously, Lotte’s e-commerce apps and their customers’ data were not central- ized: There was a Lotte Department Store app, a Lotte Mart app, and so on, and collating all the data from these separate apps was very difficult. While Lotte Shop- ping had always planned to resolve these issues, the timing of the rollout of Lotte On coincided with COVID-19, which was in many ways a wake-up call for Lotte. Although Lotte On had been two years in the making, it was the surge in online shopping during the pandemic that made Lotte Shopping accelerate its launch. This was also consistent with Lotte Shopping’s plans to close down some of its brick-and-mortar shops, which had been facing fierce competition from other e-commerce players for some time. Lotte Shopping, which had 17.6 trillion won ($416 billion) in sales in 2019, suffered a net loss of 840 billion won ($772 million) the same year, 4 and the pandemic sped up its restructuring and downsizing. 5 In fact, Lotte Shopping planned to close 244 physical stores during the 2020 to 2022 fiscal years. 6 The Initial Launch of Lotte On Predictably, sales activity on Lotte On was somewhat tied to the severity of the COVID-19 situation in South Korea. As one example, during the enforcement of social distancing level 2.5 in the Seoul Capital Region in the last weekend of August, sales of “Lotte On” increased by 37.2 percent compared to the previous month. 7 (The government-mandated social distancing levels in South Korea are based on a scale of 1 to 3, where 1 is the most relaxed and 3 is the most stringent. 8 ) Lotte On also came up with promotions that were directly related to the pandemic. Since people were spending more time at home, Lotte On held a special exhibition in August, “The God of Tidying Up the House” ( ‘정리의 신 기획전’ ), to offer discounts on home and living products. 9 Lotte On also offered e-coupons as gifts for the Chuseok harvest festival that began in late September, as social gatherings were cancelled and digital presents became more popular. 10 Apart from online promotions, Lotte On also conducts big data analysis on spending patterns in collaboration with Lotte Members, a membership service that allows Lotte customers to save and use points during purchases. Lotte Members boasts 39 million registered members, or 76 percent of the total population of South Korea. Through “hyper-personalization” services, Lotte On hopes to reduce the amount of time its consumers need to locate suitable products and services, and to improve the recommendations it provides to its customers. As of October 2020, Lotte On had around 35 million user sessions per month and 13.5 million monthly active users. Customers in their 30s comprised 38 percent of all customers, followed by customers in their 40s who comprised 34 percent of the customer base, making these the two largest segments by age group.