Investment in startups from prominent retail players in Korea is now being activated.
The synergy now is between the startups’ ideas and the major retailers’ need for new stores.
As domestic retailers’ growth stagnates due to sluggish domestic demand and changing consumer culture, this is also a reason to increase investment through startup investment.
The number of cases where technology is integrated into existing retail processes and stores increases, allowing large retailers to benefit as investors or strategic alliance partners.
Programs for Startups are the beginning.
Most investments are made for less than KRW 100 million (about USD 100,000) per individual investment.
Most investments are made for less than KRW 100 million (approximately USD 90 thousand) per individual investment.
Lotte Group, Korea’s largest retailer, operates the Lotte Accelerator with a capital of KRW 15 billion (about US$12 million).
Lotte Group Chairman Shin Dong-Bin has increased his capital to KRW 5 billion (US$4.5 million).
The Lotte Accelerator Program has supported over 100 startups with about KRW 20 million (US$18 thousand) to KRW 50 million (US$45 thousand) per teaching program.
The program was run from the first to the fourth program.
The invested startups grew 3.4 times and received additional follow-on investments.
MYRO, known for its O2O application called Last Order, secured KRW 2 billion (US$ 1.8 million) in funding from investors during its participation in the L- CAMP program.
Lotte Accelerator operates L- CAMP.
GS Homeshopping has invested in 600 Startups as a portfolio.
GS Homeshopping is well aware of the potential profits from investing in startups.
The company has a track record of partnering with startups to create synergy and boost sales.
One way they do this is by selling the products of the startups they invest in through their T-commerce channel.
Alternatively, they may use the startup’s technology within their operations.
As an example of this, when Varram, a pet robotics company, launched its first pet robots, GS Homeshopping added them to its menu and incorporated the startup’s AI technology to appeal to customers.
Pros and Cons of Startup Investment
“A+B, the company behind the online editing shop ’29CM’, was acquired by fashion app company ‘Style Share’ in March 2018.
A+B was one of the leading startups GS Home Shopping invested in, with a KRW 6.9 billion (USD 6.9 million) investment in 2013.
The stake sale resulted in a profit of around KRW 13 billion (USD 13 million) for GS Home Shopping, making it one of the most successful venture investments for the company.
However, only a few GS Home Shopping’s related companies have recorded a surplus as of last year, with the majority remaining in the red regarding investment results.
According to an anonymous investment manager at a Korean conglomerate, he said,
“We are considering the investment as social contribution first and expanding into new business rather than net investment purpose.” Additionally, he said that “I have seen some big companies are spoiling the investment while they are trying to adapt its operational bureaucratic culture.”
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