The Business Korean Review was produced by Korea Business Central and long-time student of Korean, Christopher Hales. The virtual store has been a huge success with commuters and drove over 900,000 app downloads in less than one year, making the Homeplus app the most popular shopping app in South Korea. Travel time on public transportation: South Koreans spend a significant amount of time on public transportation, predominantly between home and work. Advances in Marketing, Customer Relationship Management, and E-Services. Tom Tucker: What do you identify as the strengths of Homeplus in the Korean market vis-à-vis E-mart and Lotte Mart, and what areas are you playing catch-up? Tesco Links to an external site. He has a very strong personality. Does market success in East Asia sometimes just seem like of the draw, or are there market characteristics in specific countries that are better matched to individual retailers? It had won a variety of awards, such as the Green Management award, Social Contribution Company award and the Eco-friendly Management award.
The success of virtual retail would also hinge on a strong back-end for order fulfilment and a supply chain enabling timely delivery. Toys R Us has learnt that there are differences in consumption patterns. With Lotte Mart, they are the clear third player in the market, but I have definitely seen them improve over time here. They value convenience and technology to accommodate their busy lifestyle. This case illustrates how a company can develop its social contribution activities.
That was one of the challenges that Tesco found in Taiwan. And they are able to keep their customers by offering them the satisfying experience of easy-to-use technology, on-time delivery and quality products. Another similarity is just the density of population you get in the big cities. Going international is one of the primary growth strategies available to a retailer when its domestic market is saturated. Tesco increased its interest in Homeplus to 81 per cent in June 1999 and to 89 per cent in February 2002. As you say, the discount brands, the hypermarkets, as we call them in Tesco, they really just started in the early 1990s. Homeplus reported that the majority of the orders are placed at 10 am and 4 pm, when people are commuting to and from work.
What did they do wrong and what are the key success factors that Homeplus has utilized to survive and thrive in Korea? I think one of the big parts is just the way of entry, so coming in as a joint venture, which is what Tesco did, versus going in organically. The Korean discount retail market really only goes back to the early 1990s with the establishment of E-mart. Interestingly, Tesco also entered the Korean market in a joint venture with Samsung, as you alluded to, and has since acquired 100% ownership of the Homeplus chain in Korea. When they do shop for products, an increasing number of South Koreans go online. Walmart learnt this the hard way when its initial entry into China had the wrong merchandise. Again, that helps the overall offer. What challenges, threats or opportunities do these stakeholders pose? Retail was a relatively new area.
At that point it was just two stores, and it was one of their first international businesses. He has won many awards, such as the Green Award management, social contribution and reward environmentally friendly company management award. Online sales increased 130 per cent since the introduction of the virtual stores and registered app users increased by 76 per cent. Tom Tucker: After Carrefour withdrew from the Korean market they sold their operations to E. Tesco executes this proposition through multiple channels, including hypermarkets, grocery stores, convenience stores and online. A hybrid model could be a marketplace aggregator who could use the existing kirana stores for delivery. But having said that, Asia has definitely grown on me.
I do find the culture here very interesting. Typically, therefore, the company's value proposition is to provide customers with the products that they want at a low price. Tom Tucker: This has been the latest in our ongoing Korea Business Interview Series. And then the staff themselves in all the stores are encouraged to engage with the local community and help out there, so engage with fundraising events for the local community, doing voluntary work as well. Tesco took 51%, Samsung 49%. Tom Tucker: In your acquisition of Homever you must have faced a lot of challenges from overlapping store territories to cultural issues and even the difficulties of making a success of store sites which had acquired negative stigmas in their respective neighborhoods.
We were able to offer out an olive branch there, and that really helped on labor relations. As the economy progressed and South Koreans invested more time and money into their careers and high-tech devices, Tesco adapted its value proposition to fit its on-the-go customers. Tom Tucker: How did that strategy come about? Just thinking of supermarkets, there are some small supermarkets which are really quite poor, not well run, quite expensive, and not great on hygiene or food safety, and I think those stores are going to struggle whatever the environment. Over the next seven years, Tesco will buy a further 10 per cent of Homeplus shares from Samsung Corporation, taking its interest to 99 per cent. I will be expecting to spend a lot of time on aeroplanes in China. Your responsibilities I imagine have that marketing element to them, and by all means take advantage of the captive audience when you have it.
One of the things I found quite interesting, actually, is just looking at the different presentation styles from our Korean directors and the U. Wal-Mart, as you say, they are expanding very quickly in the China market. Integrating a business like that is not an easy job, and it was done remarkably well. I had the chance to live in Tokyo for a couple of years, and while I was there I did visit Seoul for a few days and did some other travels throughout Asia as well. Tom Brown: That discussion about saturation point, that was very similar in the U. Despite the popularity of globalisation in retailing, most retailers are still struggling to develop competencies to succeed in global markets.
The deal further extends Tesco's presence in Asia. Power of technology in traditional industries: Technology has a disruptive power in traditional industries, such as retailing. What are some of the advantages and disadvantages of the unique Homeplus E-commerce strategy? Tom Brown: I think the first thing we did was to learn from the Homever mistakes. Tom Brown: I made a big decision recently to move away Tesco after 14 very enjoyable years. In East Asia they tend to be vertical stores with car parking above or below the store.
What has helped is that public transportation is reliable and inexpensive, and is the fastest and most efficient way to get around. To reach this niche target consumer with virtual stores would be different in every Indian city. Realistically, I think you can expect the top three operators to be opening each about eight to ten stores a year, no more than that. Then I think the other part that made it successful was just the scale of the business and the synergies. It also operates in Malysia, Taiwan and Thailand, and has made high profile entries into Japan and China over the past year. That really backfired on them.