The Retail Revolution in Korea 2002. 10. 23 Oh-Hoon Kwon,  CIO of LOTTE Group
Today’s agenda <ul><li>I.  Trend in Korean Retail Industry </li></ul><ul><li>1. Growth by Sector </li></ul><ul><li>2. Tren...
Trend in Korean Retail Industry  - Growth by Sector Department Store (13.3%) Discount Store (7.6%) TV Home Shopping(1.8%) ...
Trend in Korean Retail Industry   - Growth by Sector When three companies capture market, customers can make optimized cho...
Trend in Korean Retail Industry   - Growth by Sector (D/S) Discount stores have grown at about 30% annually and will overt...
Trend in Korean Retail Industry   - Growth by Sector(T-commerce) With a growing number of CATV viewers and TV shopping pla...
Trend in Korean Retail Industry   - Growth by Sector(T-Commerce) 1998 1999 2000 2001 2002(1H ) Sales Sales Profit 4.9 8 15...
Trend in Korean Retail Industry   - Growth by Sector(Internet Mall) Internet shopping is expected to be the fastest growin...
Trend in Korean Retail Industry   - Growth by Sector(Internet mall) LOTTE.com’s Vision Today’s Lotte.com( www.lotte.com ) ...
Trend in Korean Retail Industry   - Growth by Sector(Entertainment) A: Department Store  B: Hotel C: City Air Terminal  D:...
<ul><li>Important to Mental distance toward Customer </li></ul><ul><li>Improve quality Compared with Cost </li></ul><ul><l...
Trend in Korean Retail Industry   – Enabler(Internet) Entering e-Commerce via Internet has fundamentally changed  relation...
Trend in Korean Retail Industry   – Enabler(Collaboration) Open Market Negotiations  Price-based discussions Adversarial R...
Trend in Korean Retail Industry   - Enabler(Collaboration) Collaboration initiatives between retailers and their suppliers...
Trend in Korean Retail Industry   - Enabler(Collaboration) Different geographic regions have evolved at varying rates with...
Trend in Korean Retail Industry   - Enabler(Collaboration) Three fundamental collaboration models have emerged, each with ...
Maximum scale of 5points Source: KRG, 2001. 10, eBusiness invest 100 higher rank companies 4.71 4.33 3.73 3.6 3.47 3.42 0 ...
Maturity rate of eBusiness by industries Government  Manufacture  Finance  Retail&svc  IT  Construction  Total Average Sou...
Investment plan in 2002 Retail&Svc) 75.9% 62.1% 41.4% 37.9% 37.9% 34.5% 0% 10% 20% 30% 40% 50% 60% 70% 80% Security  CRM  ...
Source: KRG 2001.8, 170 enduser survey, Revenue: over US$100M <ul><li>E-shopping mall being constructed actively, but eCRM...
Initiatives -  CRM Reinforce Customer Royalty by CRM <ul><li>Easy to apply and introduce CRM as the tendency of approachin...
Korean Retail players built Web-EDI preferentially and currently they are driving  to built mainly CMI/VMI, CAO based on i...
<ul><li>Partnership with Supplier </li></ul><ul><li>CPFR – Collaborative Planning, Forecasting & Replenishment </li></ul><...
Strategic Alliance Demand Forecasting on S/C Optimized Logistics e-Business Product Category Management <ul><li>As joint i...
<ul><li>ABC </li></ul><ul><li>Based on operating activities Cost distribution and Management, Support effective decision m...
- Organization and culture  - BSC - Technologies - Logistics network  SCM Strategy SCM  Components SCM Infrastructure <ul>...
Initiatives   -   Logistics Network   Since 1999, it has increased 30% annually, and it reached $1.2 billion sized market ...
Initiatives  - B2B Strategy: e-Marketplace While B2B e-market place in Korean retail industry is in embryo, the government...
Initiatives   - B2B Strategy: e-Marketplace LCN( L otte  C ommerce  N et)   is  “ Private Community Network ”  that maximi...
Strategy in Retail Industry Provide consolidated  e-Biz environment <ul><li>Provide single integrated cyber space both Lot...
Strategy in Retail Industry XML/EDI(VAN) CMS P D S C P F R C M VPN Network Back Born, Security, Contact Center   Lotte GDC...
Strategy in Retail Industry LCN Center Retail Providers EAN Korea KoreaRetail Xchange Establish Global Standard of Infrast...
The Retail Revolution in Korea Thank You! [email_address] LDCC
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  • 1 Good Afternoon everyone! This is Oh Hoon Kwon, who is C I O of Lotte Group. Today, I am very honour to be here. Before presentation, I briefly introduce Lotte Group. Lotte Group founded in 1967 started with confectionery business, and now Lotte Group has reached 33 subsidiaries which business is diversified covering foods, entertainment park, service, hotel, retail, IT, chemical, construction, and so on. Lotte group has positioned No. 1 position in the retail, entertainment, and foods sector since 1990’s and is six th biggest enterprises in Korea.
  • 4 Korean enterprise is trying to maximize operating efficiency and satisfactory various internal enterprise’s needs thru integration and management of information, Money, resources, products, and services on Supply Chain with SCM. What is SCM? I think You know SCM, but I mention Definition of SCM shortly. Supply chain management (SCM) is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies. It is said that the ultimate goal of any effective supply chain management system is to reduce inventory (with the assumption that products are available when needed). As a solution for successful supply chain management, sophisticated software systems with Web interfaces are competing with Web-based application service providers ( ASP ) who promise to provide part or all of the SCM service for companies who rent their service. Supply chain management flows can be divided into three main flows: The product flow The information flow The finances flow Let’s go back to the Main subject. Look over the trends in Korean retail environment and retail Strategy. In 1950’s, Retailer focused on distribution then assortment in 1960’s. in 1970’s customers was concentrated on price. Choice of Products and services was broad in 1980’s . In 1990, People was concentrated on quality. After 1990’s to so far, supply and demand have balanced and Retailer has emphasized on customer segmentation and customizing. So Retailer and Manufacturer use SCM and CRM to acquisition, maintenance, and retention customers. Although Before 2000, physical distance to customer was very important trend, it is not that big important now because current customers shop large volume at a time so they do not hesitate to drive a hour for shopping. Moreover, they were concentrated on improvement of price and Quality, but they emphasized service quality and convenience like home-delivery and e-retailing. The most important trend of Present is “Tailing Service”. It means retailer are trying to grasp what customer wants and provide the customer wants. Here we going to move next step.
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  • The Retail Revolution in Korea

    1. 1. The Retail Revolution in Korea 2002. 10. 23 Oh-Hoon Kwon, CIO of LOTTE Group
    2. 2. Today’s agenda <ul><li>I. Trend in Korean Retail Industry </li></ul><ul><li>1. Growth by Sector </li></ul><ul><li>2. Trends </li></ul><ul><li>3. Enabler </li></ul><ul><li>II . Present condition of e-Business in Korean Retail Industry </li></ul><ul><li>III. Initiatives </li></ul><ul><li>1. CRM </li></ul><ul><li>2. Retail SCM </li></ul><ul><li>3. TO Be Model </li></ul><ul><li>4. B2B Strategy: eMarketPlace </li></ul><ul><li>IV. Strategy in retail Industry </li></ul>
    3. 3. Trend in Korean Retail Industry - Growth by Sector Department Store (13.3%) Discount Store (7.6%) TV Home Shopping(1.8%) Supermarket(4.2%) CVS(1%) 1999 2002(E) Discount Store and Home shopping showed Rapid growth rates in Korea, but supermarket and Department Store keeps almost flat growth in Korean retail industry * Source: National Statistics Office, Samsung Economic Resource Institute Market Share by Retail Sector 27.9% 37.5% Department Store (13.9%) Discount Store (14.2%) TV Home Shopping(3.4%) Supermarket(4.2%) CVS(1.8%)
    4. 4. Trend in Korean Retail Industry - Growth by Sector When three companies capture market, customers can make optimized choice, competition showed proper level, and market efficiency increases. Also, market share is concentrated these leading companies (The Rule of Three) Market Concentration in Dept. Store Sector Collective Market Share of Big 6 Discount stores [unit: %] 68 35 33%p 75 30 45%p [unit: %] *Source: National Statistical Office, LG Economic Research Institute, A. T. Kearney Analysis
    5. 5. Trend in Korean Retail Industry - Growth by Sector (D/S) Discount stores have grown at about 30% annually and will overtake department stores in sales by 2003, but the growth rate is expected to decrease gradually The Total Number of Discount Store In Korea Source: National Statistical Office, Samsung Economic Research Institut, A. T. Kearney Analysis Implications and influences (Trillion Won) Source: National Statistical Office,, Bank of Korea, A. T. Kearney Analysis <ul><li>The Sales of discount store is expected to surpass that of department store between 2002 and 2003 </li></ul><ul><li>Low-end pricing contributes to the stabilization of consumer prices. </li></ul><ul><ul><li>Discount store lowered consumer prices by 1.79% from 1996 to 1999 </li></ul></ul><ul><li>Power will shift from manufacturers to discount store </li></ul><ul><li>Discount stores will number 270 – 280 by the end of 2002, reaching the optimal number and afterwards the growth will slow down gradually </li></ul>
    6. 6. Trend in Korean Retail Industry - Growth by Sector(T-commerce) With a growing number of CATV viewers and TV shopping players, TV home shopping industry has grown fast and is expected to continue to grow Key Drivers for Market Growth Historical Sales Growth <ul><li>Increasing Number of Cable TV viewers; </li></ul><ul><li>New entry; </li></ul><ul><li>Incumbents: LG Home Shopping , CJ39 </li></ul><ul><li>New entrants: Hyundai Home Shopping, Woori Home Shopping, Agricultural&Fishery TV </li></ul>CAGR =69.7% No. of CATV Subscriber (Thousand) (Billion Won) <ul><li>Rapid growth of home shopping leads to </li></ul><ul><ul><li>Growth of courier service companies </li></ul></ul><ul><ul><li>Emergence of an effective sales channel for mid and small size companies </li></ul></ul><ul><ul><li>Growing importance of customer relationship management </li></ul></ul>CAGR =88.9% Source: Hana Economic Research Institute, A. T. Kearney Analysis Source: Korea Cable TV Association, A. T. Kearney Analysis
    7. 7. Trend in Korean Retail Industry - Growth by Sector(T-Commerce) 1998 1999 2000 2001 2002(1H ) Sales Sales Profit 4.9 8 15.2 22.6 25 [unit: million $] Growth of CJ39Shopping * Source: CJ39Shopping Conventional market still have accounted for about 62.5%(2002E ) in the Korean retail sector, while TV Home Shopping has occupied just 2.8%. Therefore, it has a lot of possibility to grow in Korean retail industry CJ 39 Shopping is the frontier and leading TV home Player in Korea
    8. 8. Trend in Korean Retail Industry - Growth by Sector(Internet Mall) Internet shopping is expected to be the fastest growing sector in retail industry, and the competition is intensifying with new entrants from other industries Sales History and Forecast Source: Hana Economic Research Institute, A.T. Kearney Analysis (Billion Won) CAGR = 103.7% <ul><li>Among over 1700 players in 2000, only 10% of them sell more than 0.1 billion won per month. </li></ul><ul><li>Profitability is the most serious issue plaguing all of the players, but some of big players are expected to reach BEP in 2002 </li></ul><ul><li>Compound Annual Growth Rates of internet shopping until 2003 is 103.7% </li></ul>
    9. 9. Trend in Korean Retail Industry - Growth by Sector(Internet mall) LOTTE.com’s Vision Today’s Lotte.com( www.lotte.com ) Internet business growth in 2001 is twice than 2000, and the size of e-commerce reached $17.4 billion. Moreover, internet users in Korea reached 20.2 million. To grow continuously, internet providers should be concentrated on solve security Problem. <ul><li>Founded January 2000 </li></ul><ul><li>Opened Internet Duty free shop </li></ul><ul><li>Started to sell private brand </li></ul><ul><li>Launched the merchandise delivery </li></ul><ul><li>system jointly with off-line stores </li></ul><ul><li>Started catalog business </li></ul><ul><li>Opened &quot;Lotte B2B Mall for meat&quot; </li></ul><ul><li>Reached 160 million in first half in </li></ul><ul><li>2002, which increased 358% </li></ul><ul><li>comparing to same period in 2001 </li></ul>
    10. 10. Trend in Korean Retail Industry - Growth by Sector(Entertainment) A: Department Store B: Hotel C: City Air Terminal D: Trade Tower E: Hotel F: Exhibition Center G: ASEM Convention Center H: Business office center Entertainment Shopping mall provides both traditional function and entertainment factor in a same area. A few years ago, In spite of popularity, it dulled to make profits, but it makes big progress currently. Coex Mall LotteWorld Department Store Hotel Theme Park Discount Store Clinic Sports Center Ice Link
    11. 11. <ul><li>Important to Mental distance toward Customer </li></ul><ul><li>Improve quality Compared with Cost </li></ul><ul><li>Expand home delivery and e-Retailing </li></ul><ul><li>Provide Tailored Service </li></ul>The Next Phase 2000+ Domestic Retail sector environment and retail Strategy Retail Trends Implications for Logistics Currently, Many companies have practiced joint e-SCM strategy to raise operating efficiency on S/C in Korean Retail Sector through shared information between partners. New Trend in Korean retail sector is Providing of “Tailing service” 1950s 1960s 1970s 1980s 1990s Distribution Assortment Price Choice Quality Extend e-SCM to e-Retailing srtategy DSD (Direct Store Delivery by supplier) Centrali -zed N/W Reengineering <ul><li>important to physical distance to customer </li></ul><ul><li>Physically expand number of store and size </li></ul><ul><li>Emphasize on improvement of price & quality </li></ul><ul><li>Provide Seamless customer service </li></ul><ul><li>Current Big Five strategies in domestic Retail </li></ul><ul><li>Strategic Alliance with partners </li></ul><ul><li>Demand forecasting and Replenishment in S/C </li></ul><ul><li>Optimized operation thru Optimized logistics </li></ul><ul><li>Re-architecture of e-Business operation Process </li></ul><ul><li>Product Category Management </li></ul>CRM SCM Cust. Value Balanced Supply and Demand Customer Segmentation and customizing Trend in Korean Retail Industry - Trends
    12. 12. Trend in Korean Retail Industry – Enabler(Internet) Entering e-Commerce via Internet has fundamentally changed relationship between partners on supply chain, and it has recognized efficiency usage of eCommerce is the one of the best competency advantage in competition. Internet is that, as built connectivity whole supply chain from customer’s customer to supplier's supplier, the connectivity make possible to support goods and service transaction, processes, and shared sales information. Supplier Third Party Logistics Provider Retailer Distributor Customer Information Products / Material <ul><li>Real time sales info. Analyze & </li></ul><ul><li>Sales based on customer’s needs </li></ul><ul><li>Customization of goods & service based on customer management such as spending pattern, population, and regional types </li></ul><ul><li>Upgrade customer service by </li></ul><ul><li>support both On-line and Off-line simultaneously </li></ul>Convergence Speed <ul><li>Prompt response to customer & market, fasten planning </li></ul><ul><li>End-to-End Real Time Tracking of money, goods, service, and info. </li></ul><ul><li>Reduced time to market & product Life Cycle Time </li></ul><ul><li>Reduced delivery Lead time </li></ul>Connectivity Go-Global <ul><li>Possible Real Time connect one to one or one to many </li></ul><ul><li>Reduce transaction/investment/operation cost </li></ul><ul><li>Globalization within organization, between organization, and between companies via Internet </li></ul>Manufacturer
    13. 13. Trend in Korean Retail Industry – Enabler(Collaboration) Open Market Negotiations Price-based discussions Adversarial Relationships Coordination Information linkage (EDI) Longer-term contracts Collaboration Supply Chain Integration Joint Planning Technology Sharing Customer Partnering Collaboration is that <ul><li>Share information and IT technology </li></ul><ul><li>Centralized decision making on Supply Chain dimension not sole company unit, </li></ul><ul><li>Inter-dependence between companies in S/C, </li></ul><ul><li>Make efforts maintenance and improve relationship between companies </li></ul><ul><li>Regular Communication, prompt response, and increased number of communication </li></ul><ul><li>Regular Communication between executives </li></ul>Based on Changing in Mind-set and arousing strategic sympathy on Supply chain, Supply Chain is not achieved by only emphasizing tech sided Version-up or depend by a few specialists. It needs new business mind based on collaboration and repositioning of organization and resources With collaboration, we can access following issues in supply chain….. <ul><li>Discrepant product supply forecasting between retailer and manufacturer </li></ul><ul><ul><li>Manufacturer do not recognize retail side’s sales strategies and promotion planning, and so on in advance </li></ul></ul><ul><ul><li>Retail side do not reflect manufacture side’s new product development and related advertisement planning. </li></ul></ul><ul><ul><li>Absence of joint analysis about market trend and consumer information </li></ul></ul><ul><li>Absence of joint demand and supply management planning and strategy on Supply Chain </li></ul><ul><li>Absence of access toward Supply chain related to “Across organization, Between organizations” </li></ul><ul><ul><li>manufacture side’s marketing, Sales, and Production Planner </li></ul></ul><ul><ul><li>Needs supply process that retail side’s category buyer, person in charge of order, and sales forecast analyze team participant in and share information </li></ul></ul>Collaboration is that, it is important to get joint vision related with clear forecasting and joint decision making based on trust and shared information between partners on Supply Chain
    14. 14. Trend in Korean Retail Industry - Enabler(Collaboration) Collaboration initiatives between retailers and their suppliers have gradually evolved from data capture to supply chain management initiatives Evolution of Supplier/Retailer Collaboration 1970 1980 1990 2000 2010 Product I.D. Standards QR/VMI/CRP 1 Efficient Consumer Response(ECR) Public Exchanges Private Exchanges UPC EDI ERP XML Technology Enablers: CPFR Level of Collaboration
    15. 15. Trend in Korean Retail Industry - Enabler(Collaboration) Different geographic regions have evolved at varying rates with respect to their trading partner collaboration practices Supply Chain Initiative Adoption by Geography Product I.D. Standards QR/VMI/CRP Efficient Consumer Response (ECR) Public Exchanges Private Exchanges CPFR Asia Pacific Europe and the United States Time Level of Collaboration Retailer initiatives in Asia Pacific tend to be about five years behind those in Europe and the United States.
    16. 16. Trend in Korean Retail Industry - Enabler(Collaboration) Three fundamental collaboration models have emerged, each with varying types of functionality and degrees of benefits CPG Retailer One-to-One One-to-Many CPG-to-Retailer Collaboration Models Many-to-One Many-to-Many (Retail-Driven) Many-to-Many (CPG-Driven) Private Exchange Public Exchange 1-to-1 Underlying Data Standardization
    17. 17. Maximum scale of 5points Source: KRG, 2001. 10, eBusiness invest 100 higher rank companies 4.71 4.33 3.73 3.6 3.47 3.42 0 1 2 3 4 5 e-procurement SCM ERP eMP CRM KMS eBusiness Solution Use <ul><li>e-Procurement is the first in rate of use. SCM, ERP are next. </li></ul><ul><li>The reasons why e-Procurement Solution is the first are high-rated procurement by internet as well as easy to transform procurement process to e-Commerce. </li></ul>Prospect of rapid growth in SCM, e-Procurement and eMP in the future. Present condition of e-Business in Korean Retail Industry
    18. 18. Maturity rate of eBusiness by industries Government Manufacture Finance Retail&svc IT Construction Total Average Source: Korea Computer Research/IT Newspaper, KRG, 2002 <ul><li>Finance is leading the eBusiness in Korea. It recorded 20.53 </li></ul><ul><li>The next are Retail&Svc(17.87), IT(17.06) </li></ul><ul><li>Manufacture, Construction and Government showed low score compared with other industries </li></ul>Retail&Svc showed relatively high rate but still low. In addition e-Business is prospected the high growth in the near future. Present condition of e-Business in Korean Retail Industry
    19. 19. Investment plan in 2002 Retail&Svc) 75.9% 62.1% 41.4% 37.9% 37.9% 34.5% 0% 10% 20% 30% 40% 50% 60% 70% 80% Security CRM KMS SCM DW Mobile Source: e-newspaper, KRG, 2002 <ul><li>Security is the first(75.9%)and next are CRM(62.1%), KMS(41.4%), SCM(37.9%) </li></ul><ul><li>Retail&Svc is expected to drive the demand of SCM compared with other industries. </li></ul><ul><li>Some of big retailors have implemented 1st phase and is expected to invest continuously this year. According to the research 10s among 29 companies are doing SCM Project. </li></ul><ul><li>The reasons why eBusiness is accelerated are invasion of Multinational Distribution companies and reduction of revenue caused as tough competition. </li></ul>SCM is leading solution in Distribution&Svc after 2002 Retail&Svc Present condition of e-Business in Korean Retail Industry
    20. 20. Source: KRG 2001.8, 170 enduser survey, Revenue: over US$100M <ul><li>E-shopping mall being constructed actively, but eCRM expected to lead the market soon. </li></ul><ul><li>SCM is going to be introduced irrelatively industries, and eProcurement Infra is expanded in distribution and CPG industries. </li></ul>SCM and CRM leading the e-business market soon Present condition of e-Business in Korean Retail Industry 1.3% 2.7% 2.7% 1.3% stop/withhold 23.7% 58.7% 61.3% 42.7% No plan 64.5% 21.6% 28% 50.7% Plan 10.5% 16.0% 8.0% 5.3% operating eCRM SHOPPINGMALL eMP SCM Index
    21. 21. Initiatives - CRM Reinforce Customer Royalty by CRM <ul><li>Easy to apply and introduce CRM as the tendency of approaching to customer in Retail industry </li></ul><ul><li>Need different CRM strategy according to types of business </li></ul><ul><li>Share customer and Sales information with suppliers to deliver goods at right time through CRM </li></ul>Integrated DBM’s Closed Loop Process Service Sales Opportunity Customer maintenance Marketing Sales Customer DB Customer Acquisition Customer Management Customer Retention Customer Viewpoint Functional point Collect Customer info. Strategy Work IT <ul><li>Prompt response to fasten changed IT </li></ul><ul><li>Reduced implementation & maintenance </li></ul><ul><li>Costs </li></ul><ul><li>Customer info. Analysis tool </li></ul><ul><li>Integrated Customer related work </li></ul><ul><li>such as Marketing, Sales, Service, etc </li></ul><ul><li>Understand Consumer’s needs </li></ul><ul><li>Efficient Service Management </li></ul><ul><li>Management of redundant data </li></ul><ul><li>Shared enterprise info. </li></ul><ul><li>Established Consumer-centric Process </li></ul><ul><li>Consumer Segmentation </li></ul><ul><li>Customer Maintenance and acquisition </li></ul>Market Organizer Integrated DBM Plan
    22. 22. Korean Retail players built Web-EDI preferentially and currently they are driving to built mainly CMI/VMI, CAO based on improvement of logistics Korean Retail SCM Case Initiatives - Retail SCM LotteMart, LG Household & Health Care Yuhan-Kimberly, Chelijedang, P&G CarrefourKorea Ogguki, Cheiljedang, P&G Yuhan-Kimberly, Unilever, Cheiljedang, Hyundae Dept. LGmart, DongsuFood, Cheiljedang, LotteMart, Yuhan-Kimberly LGmart Yuhan-Kimberly, P&G, Unilever, EDI CMI/VMI CPFR CMI/CAO CMI CM VMI LGmart Pulmuone, Aseen FineKorea SCM
    23. 23. <ul><li>Partnership with Supplier </li></ul><ul><li>CPFR – Collaborative Planning, Forecasting & Replenishment </li></ul><ul><li>Reduce Lead time and inventory thru VMI </li></ul><ul><li>Co-managed product planning/development/display/assortment/sales </li></ul><ul><li>Visibility of Supply Chain </li></ul><ul><li>Based on partnership with supplier, Real Time handling of inventory and purchasing planning through visibility of supply chain </li></ul><ul><li>Shared consumer’s trends with whole supply chain </li></ul><ul><li>Provide Customized service through reflected customer’s needs instantly </li></ul><ul><li>Cut a price with reducing Lead Time and inventory </li></ul>We should equip Responsive and Consumer-Driven System to raise operational efficiency on S/C with working together between retail and manufacture We should make simplify and optimize Products/information/money flow to raise efficiency from Manufacture-Process-Logistics, distribution to consumers on supply chain. Then finally, expanded sales to maximize customer satisfactory Initiatives - To Be Model Retail Consumer Minimized inefficiency in Supply Chain Raised Customer Satisfaction Raised Operation efficiency Raised Customer Royalty Expanded sales Opportunity <ul><li>Strategic alliance </li></ul><ul><li>Demand Forecasting </li></ul><ul><li>Optimized Logistics </li></ul><ul><li>e-Business </li></ul><ul><li>Category management </li></ul>Maximized Profit thru Customer Satisfaction
    24. 24. Strategic Alliance Demand Forecasting on S/C Optimized Logistics e-Business Product Category Management <ul><li>As joint investment related with partner’s internal and external non-value added activities to reduce cost and raise efficiency, provide benefits to customers as well as the partner </li></ul><ul><li>Raise flexible supply responsibility and effective management of materials as operating supply forecasting and planning activities according to end-user’s situation </li></ul><ul><li>Through implementation of advanced e-Business, seek to operation efficiencies such as reduced cost, minimized error rates, increased transaction cycle time, and so on </li></ul><ul><li>Through strategic alliance, effective equipment, and usage of IT technologies, manage product distribution network rationally </li></ul><ul><li>Through product assortment in retail channel and balancing between costs, manage and maintain product category efficiently to increase consumer value </li></ul>Big Five Strategies in Retail SCM SCM is total strategy to cover retail and logistics that to satisfy consumer and remove inefficiency during the operation through sharing information with partners on supply chain Initiatives - To Be Model
    25. 25. <ul><li>ABC </li></ul><ul><li>Based on operating activities Cost distribution and Management, Support effective decision making </li></ul><ul><li>Initiative bundling </li></ul><ul><li>joint technology investment and distribution </li></ul><ul><li>Value based incentive </li></ul><ul><li>distribute profits fairly between partners. </li></ul><ul><li>Standard of Product Code </li></ul><ul><li>Common language in Distribution activities </li></ul><ul><li>Official Product information </li></ul><ul><li>Used Consistent Product info. </li></ul><ul><li>Shared Demand information </li></ul><ul><li>Raised planning and response capability both manufacturer and retailer thru shared consumers’ buying info. </li></ul><ul><li>Market-level Forecasting </li></ul><ul><li>Support optimized process </li></ul><ul><li>Built logistics management process </li></ul><ul><li>Exchange and manage product info. - EDI </li></ul><ul><li>Direct Store Delivery </li></ul><ul><li>Fast-moving goods </li></ul><ul><li>Co- Consolidation </li></ul><ul><li>Slow-moving goods </li></ul><ul><li>Joint delivery </li></ul><ul><li>Coordinated transport </li></ul><ul><li>make delivery route to deliver many tasks at once </li></ul><ul><li>Cross-Docking </li></ul><ul><li>Balanced variety </li></ul><ul><li>improve product assortment with collaboration </li></ul><ul><li>Product deletion </li></ul><ul><li>Product In/Out </li></ul><ul><li>New Product management </li></ul><ul><li>Centralized conversion </li></ul><ul><li>Based on optimized logistics field, support to concentrated on competency advantages in process and manufacture field </li></ul>Strategic Alliance Demand Forecasting in S/C Optimized Logistics e-Business Category Management Details of Big Five Strategies in Retail SCM Based on progressive collaboration between partners, reduced inefficiency sectors like external factors and maximized operating efficiencies Initiatives - To Be Model
    26. 26. - Organization and culture - BSC - Technologies - Logistics network SCM Strategy SCM Components SCM Infrastructure <ul><li>- Strategic Alliance </li></ul><ul><li>- Demand Forecasting in Supply Chain </li></ul><ul><li>- Optimized Logistics </li></ul><ul><li>e-Business </li></ul><ul><li>Product Category management </li></ul><ul><li>- ABC (Activity Based Costing) </li></ul><ul><li>Bar-code </li></ul><ul><li>Direct Store Delivery </li></ul><ul><li>Consolidation) </li></ul><ul><li>Cross Docking </li></ul><ul><li>Web- EDI </li></ul><ul><li>Replenishment </li></ul><ul><li>category management </li></ul>As most companies built SCM components and infrastructure, Strengthen internal competency advantages and drive SCM strategies through partnership on Supply chain SCM Components and Infrastructure Initiatives - To Be Model
    27. 27. Initiatives - Logistics Network Since 1999, it has increased 30% annually, and it reached $1.2 billion sized market in 2001. Currently, Korean prime CVS players carry out solitary or joint logistics service thru its store(Lotte.com’s merchandise delivery system jointly with 7-Eleven Enterprise’s Integrated Logistic Network Lotte Confectionery Lotte Chilsung, etc Lotte Elec. LotteCanon, etc Lotte Shopping Lotte Mart, etc Lotteria TGI Friday Customer Supplier CPG Headquarter Retails Service Restaurant Eng OMS TMS WMS Logistics Control Center ERP or Legacy Interface 7-Eleven LotteHotel Lotte World
    28. 28. Initiatives - B2B Strategy: e-Marketplace While B2B e-market place in Korean retail industry is in embryo, the government and private sectors are cooperating to build B2B infrastructure dubbed “KoreaRetailXchange” Worldwide B2B E-marketplace KoreaRetailXchange <ul><li>Participants; Ministry of Commerce, Industry, & Energy, LG Mart, Lotte Magnet, Samsung Tesco, Shinsegae E-mart, Hanwha Store, Hyundai Department Store </li></ul><ul><li>Start of operation (Planned); Second half of 2002 </li></ul><ul><li>Value proposition; </li></ul><ul><ul><li>Construction of an e-marketplace of Korean nationality </li></ul></ul><ul><ul><li>Enhancing competitiveness of participants by enhancing their purchasing power and efficient supply chain management </li></ul></ul><ul><li>Functionality; </li></ul><ul><ul><li>Operate as a non profit organization to secure neutrality </li></ul></ul><ul><ul><li>Maintain openness to secure “critical mass” </li></ul></ul><ul><ul><li>Improve efficiency for participants through process standardization and offering of diverse services </li></ul></ul>*Source: A.T. Kearney Analysis <ul><li>SCM service </li></ul><ul><li>Standardized procurement </li></ul><ul><li>Standardized procurement </li></ul><ul><li>CPFR </li></ul><ul><li>Auction </li></ul><ul><li>Procurement automation </li></ul><ul><li>CPFR </li></ul><ul><li>Inventory 25% reduction </li></ul><ul><li>Cycle time 50% reduction </li></ul>Remark 17 founders & 41 members 8 founders& 9 members Participants K mart, Albertsons, Tesco Carrefour, Sears Wal-mart Leading Company 2000. 3 2000. 2 2000. 6 Starting Date Worldwide Retail Exchange Global Net Xchange Retail Market Xchange
    29. 29. Initiatives - B2B Strategy: e-Marketplace LCN( L otte C ommerce N et) is “ Private Community Network ” that maximize connectivity between subsidiaries or subsidiaries and its partner as converting offline centric business to online –centric business provide us maximum efficiency and boost profit. KoreaRetail Xchange Global-eMP Korea-eMP LCN (Private eMarketplace) Web-EDI Electric Income CA CPFR ASP LotteMart Lotte Dept. LotteLemon K - 7 Supplier Retailer . . . . . . Collaborated Companies . . L-ProNet E-Tax Bill
    30. 30. Strategy in Retail Industry Provide consolidated e-Biz environment <ul><li>Provide single integrated cyber space both Lotte Group subsidiaries and its partners </li></ul><ul><li>Create Win-Win Strategy to share and use information </li></ul>Increase business efficiency Accomplish to built national infra in retail industry <ul><li>Only one standardized infrastructure and connectivity  Synergy effect </li></ul><ul><li>Effective business process  increase profits, reduce inventory level, etc </li></ul><ul><li>Execute Korea’s Ministry supervised business for effective EC in field of retail industry </li></ul><ul><li>Seek to way to connect to external e-MP </li></ul>LCN Center manufacturer Retail Logistics Partners Alliance Support retail Contents . Authorize retail service . Settle service fee Lotte Group Branch company . Shinsegae . Samsung Tesco EDI Share Product Info Share Product info Global Sourcing EAN Korea
    31. 31. Strategy in Retail Industry XML/EDI(VAN) CMS P D S C P F R C M VPN Network Back Born, Security, Contact Center Lotte GDC Center LCN Portal Site E-Tax Bill e I C R M K M S Collaborative IT Biz E-Contract Internet Fax Service Mobile ASP Service Infrastructure Product E-Procurement Product Positioning and Create Synergy w Existing Biz. - Additional Product : *PDS, *CPFR, *CM, e-Tax Bill/Contract, Mobile - Infrastructure Product : XML/EDI, *CMS - Collaborative IT Biz. : XML/EDI Service  Collaborative company IT Supporting Biz. - Integration of LDCC’s service I  LCN Portal Promote profit extension strategy through XML/EDI - Existing and new consumer retention based on LCN - Emphasis differentiation strategy comparing to competitor Improve eTransformation Business - To be a leading company in SCM - Promote e-Transformation biz. to Lotte Group’s partners
    32. 32. Strategy in Retail Industry LCN Center Retail Providers EAN Korea KoreaRetail Xchange Establish Global Standard of Infrastructure - Create new business through co-work between LCN service and its related organizations - Establish Global trade infra through expand standardization through co-work with EAN Korea Provide convenience to connect with integrate between LDCC’s retail-centric Hub Center and other’ retailers ’ - Organize separate retail community - Co-operate with other retailers though system connection Accomplish LDCC as a Core HUB Center for electronic commerce in Retail industry
    33. 33. The Retail Revolution in Korea Thank You! [email_address] LDCC
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