Shinsegae in chaos as e-commerce units continue to weaken

Retail giant fires bosses of money-losing SSG.com, Gmarket

Author: Park Jae-hyuk

The conglomerate said on Wednesday that Shinsegae Group had decided to replace the CEOs of SSG.com and Gmarket because the e-commerce subsidiaries failed to make profits.

Choi Hoon-hak, who heads SSG.com’s sales department, has been nominated to succeed fired CEO Lee In-young, who became the e-commerce company’s sole leader nine months ago. Last September, Shinsegae fired former SSG.com co-CEO and E-mart CEO Kang Heui-seok, who previously worked as a government official and consultant for Bain & Company.

Gmarket’s CEO position will be filled by former Alibaba Korea CEO Chung Hyung-kwon after the firing of Chun Hang-il, who worked for the e-commerce company before Shinsegae acquired eBay’s Korean unit.

Both SSG.com and Gmarket have also reorganized to streamline management. Many other senior executives have reportedly been asked to leave the companies.

“We continue to innovate to make the next leap in the online platform market,” said a Shinsegae Group official. “We will strengthen our status as the leading retail company in the country.”

The recent leadership changes come two months after Shinsegae E&C’s CEO was replaced under Shinsegae Group President Chung Yong-jin, who was promoted to the top job in March. Faced with deteriorating profitability of the group’s flagship retail business, Chung has ordered a large-scale restructuring over the past three months.

In March, E-mart carried out a voluntary departure program for the first time since the establishment of the discount chain in 1993. E-mart Everyday, another subsidiary of Shinsegae that oversees supermarkets, has also decided to carry out a voluntary redundancy program this month, ahead of its merger with E-mart next month.

SSG.com is also said to be preparing for a large-scale restructuring as the company has never made any profits since its inception in 2019. Gmarket has also failed to make a profit since Shinsegae acquired the e-commerce company from eBay.

Earlier this month, both e-commerce companies contracted CJ Logistics to deliver all their products in a bid to reduce logistics costs. SSG.com is even considering selling its logistics centers to CJ.

Some market observers, however, point out that the main reason for the deterioration in profits is the president of Shinsegae.

“When Chung served as vice president, we did not record any extraordinary achievements,” said Lee Nam-woo, chairman of the Korea Corporate Governance Forum (KCGF), which is made up of capital market insiders and legal experts who strive to improve corporate governance at Korean companies .

Given that E-mart posted its first-ever annual operating loss under Chung’s leadership last year, KCGF insisted that he register as a director to demonstrate responsible management.

“The current crisis surrounding the Shinsegae Group appears to be a result of Chung trying to avoid responsibility while receiving a huge payout,” Lee said.