Lotte to sell stores to Wumart for $230m

South Korea’s Lotte Shopping said on Thursday that it has agreed to sell 21 Lotte Mart hypermarket and supermarket stores in China to Wumart Stores Inc for around 248.5 billion won ($230.2 million).

Lotte will sell a 87.38 percent stake in Lotte Mart in Beijing to Wumart and keep the remaining shares, according to Lotte Mart China.

Lotte Mart has 110 retail outlets in China. Of them, 99 are hypermarkets and 11 are supermarkets. The 21 outlets involved in the deal with Wumart include 10 hypermarkets and 11 supermarkets.

Last year, Lotte Shopping picked Goldman Sachs to manage the sale of its Lotte Mart stores in China.

Wumart is the leading retailer in Beijing and it makes sense to further strengthen its presence in Beijing by adding more stores from the deal, said Jason Yu, general manager of Kantar Worldpanel China, a research firm.

Wumart has carried out its online-to-offline services through its mobile application Dmall to serve more consumers in the New Retail digital age, requiring more brick-and-mortar stores to shorten delivery distances between stores and consumers, Yu said.

He added that consumers usually place orders using the app and the store delivers in 30 minutes. Therefore, Wumart wants to expand its store coverage to reach more consumers throughout the capital.

Yu earlier said that Lotte Mart has been facing competition from Chinese retailers and e-commerce giants. Due to its limited presence, it could not build economies of scale or create an efficient supply chain, he said.

According to Kantar’s 2017 report on fast-moving consumer goods, the sector had sales growth of 4.3 percent year-on-year. Retailers associated with the two e-commerce giants Tencent and JD led by Walmart, Carrefour and Yonghui have market share of 12.8 percent, slightly higher than those retailers involved with Alibaba Group including Sun Art Retail, which operates leading supermarket chains RT-Mart and Auchan in China.

International retailers have found a smaller market presence, falling from 11.1 percent in 2016 to 10.3 percent in 2017.