Lotte picks Goldman to manage supermarket sales in China

South Korea’s Lotte Shopping has picked Goldman Sachs to manage the potential sale of its supermarkets in China, an official at the parent group said on Thursday.

The official added that it had not been decided whether the retailer would sell all of its supermarkets in China or part of them.

Lotte Shopping previously said it was considering selling its supermarkets in China and other options.

Shin Dong-joo, the elder son of Lotte Group’s founder, said Lotte Shopping should “immediately” withdraw from the Chinese market, after most of its stores were shut down.

The elder Shin decided previously to sell most of his stakes in Lotte Shopping and three other units of South Korea’s No 5 conglomerate, his company said without providing the value of the sale.

On Monday, Lotte Group denied rumors indicating its withdrawal from the Chinese mainland market, and said it will keep doing business in China, reported Newsis, a South Korean newspaper.

According to Euromonitor, a market research provider, Lotte Mart, a hypermarket format, ranked No 17th in terms of market shares in China in 2016, at 1.1 percent.

Market leader Auchan Group SA’s RT Mart took up 11.9 percent and Stores Inc had 10.1 percent. The retail format — outlets with a selling space of more than 2,500 square meters — has witnessed a slow growth in the past three years. The hypermarket sector has grown from 655.8 billion yuan ($100.05 billion) in 2015 to 658.4 billion yuan in 2016.

Jason Yu, general manager of Kantar Worldpanel China, said Lotte is in a very difficult position in China. Like other international retailers, it was under pressure from both fast growing Chinese retailers and e-commerce giants, he said.

Lotte Mart’s limited presence in China also makes it tough to build any economy of scale and efficient supply chain, Yu said. “I think some regional players in the north or east may pick selected Lotte Mart stores if they were up for sale,” said Yu.

“Some local players are still looking for store expansions in Beijing or Jiangsu province in East China if the stores are in good locations,” said Yu.