JAKARTA (TheInsiderStories) – Indonesia’s Salim Group conglomerate has established a joint venture with Lotte Group, South Korea’s fifth-largest conglomerate, looking to expand its retail business by opening ‘iLotte’, an online shopping mall, as a full-range e-commerce site with fashion, electronics, household goods, and groceries.
iLotte will be aiming to compete head-on with established players like Alibaba’s Lazada, Lippo’s MatahariMall, and Tokopedia. At the launch event Tuesday (10/10), iLotte vice president Steven Calvin said the two firms have committed a US$100 million budget to the project as the start of the investment.
“We are committed to building this business for a long time, with no plans to sell,” said Philipp Lee, iLotte CEO.
He also said there are no plans to shut down or merge iLotte with ecommerce site Elevenia, which Salim Group took over in August.
iLotte plans to stand out in Indonesia’s crowded e-commerce landscape as an online mall that offers only authorized sellers and brands. In addition to its basic shopping categories, it plans to target Millennials with lifestyle content and South Korean fashion, beauty, and food products.
Lotte Group also said it is planning to partner with Indonesia’s largest fashion company, PT Mitra Adi Perkasa Tbk (IDX: MAPI), to make one of its brands, Sports Planet, available on iLotte. Books will also be added to the lineup in the future, the company said, in an attempt to make an online version of a mega shopping complex.
The Korean conglomerate already has brick-and-mortar locations in Indonesia, including one Lotte Department Store, 42 Lotte Marts, 30 Lotteria fast food restaurants, three Angel-in-us cafes and two Lotte Duty Free stores. The retail giant said it would expand its existing L.Point rewards service to online purchases.
Lotte said it expects synergy with Salim Group’s diverse range of businesses, from convenience stores and food to logistics and telecommunications.
For online orders in Jakarta, Lotte plans to provide a bike delivery service that delivers products from Lotte Mart to people’s homes. The company said its test run of a three-hour delivery service in the Indonesian capital received positive reviews from local consumers.
“With the retail experience that Lotte has accumulated in Korea, we plan to take the lead in Indonesia’s e-commerce industry, hand-in-hand with Salim Group, which has experience in local marketing,” Lee Jae-kwan, president of IndoLotte, the joint venture, said.
Lee added that the company hopes to earn 500 billion won in revenue by 2021 and 1 trillion won by 2023.
Indonesia is one of several Southeast Asian markets that Lotte has been eyeing since the company pulled its Lotte Mart business out of China. Korean retailers had been struggling in the Chinese market after consumers boycotted Korean products in response to Seoul’s decision to install a missile defense system that Beijing views as a security threat.
Lotte has been looking to Southeast Asia as an alternative. Last month, Lotte Card announced it would acquire the Vietnamese credit card company Techcom Finance, a subsidiary of Techcom Bank, one of the country’s top five banks, and offer credit card services and loans. It will be the first Korean credit card company to do business in Vietnam.
Emart, another major Korean retailer that pulled out of the Chinese market, is pursuing the Vietnamese market as well. After opening its first location there in 2015 and turning a solid profit, Emart said last year it would invest $200 million through 2020.