BUSAN < invest Korea

According to Pulse by Maeil Business News Korea,

Expanding its presence in the online grocery market, South Korea’s Lotte Group has kicked off establishing an AI-powered customer fulfillment center (CFC) in Busan in collaboration with UK’s global retail tech firm Ocado. Lotte aims to take the lead in a sector dominated by companies like Coupang and Kurly.

On Tuesday, Lotte Shopping unveiled the groundbreaking ceremony at the site designated for the CFC in International Logistics City, Kangseo District, Busan. The event follows Lotte’s partnership with Ocado, which was initiated in November.

“We aim to leap into the top-tier online grocery platform by establishing six CFCs nationwide, starting with Busan,” Lotte Group Chairman Shin Dong-bin emphasized in his congratulatory speech at the ceremony.

Ocado, a UK-based online supermarket giant, recorded annual revenue of 4.1 trillion won ($3.1 billion) last year. Founded by three former Goldman Sachs employees in 2000, the company went public on the London Stock Exchange in 2010.

Known for its technological innovations in the online fresh food market, Ocado has been dubbed an Amazon killer due to its automated fresh food delivery and grocery technology.

The Busan CFC marks Lotte Shopping’s first logistics center employing the Ocado Smart Platform (OSP). Covering an area of 42,000 square meters, it boasts enhanced spatial efficiency capable of accommodating 45,000 product types, doubling the capacity of conventional online logistics centers.

The center’s planned daily processing capacity is over 30,000 deliveries, twice as many as any other centers. Lotte has invested about 200 billion won in this center. Upon completion by the end of 2025, it will serve over 2.3 million households in the South Gyeongsang region, including Busan and Changwon.

Utilizing data and AI at the Busan CFC, Lotte will forecast demand and manage inventory efficiently. From product selection and packaging to delivery routes, all processes will be automated.

“With up to 33 dispatches daily, customers can receive deliveries at their preferred times. This will dramatically improve the inconveniences customers face in their online shopping experience,” said a company spokesperson.

The establishment of this cutting-edge logistics center by Lotte aims to expand its market share in the grocery delivery market. Currently, Kurly, Coupang, and SSG.com dominate the dawn delivery market, holding an about 80 percent share. The overall market size has surged from 2.5 trillion won in 2020 to 11.9 trillion won in 2023.

Lotte Shopping strategizes to differentiate itself by analyzing customers’ purchasing behaviors and adapting grocery services to fit the Korean lifestyle. Special frames for delivery vehicles, designed considering the prevalence of apartment living, and a redesigned delivery box structure form part of this strategy.

The Busan CFC will also operate as an eco-friendly logistics center. All products will be delivered using electric vehicles, and solar panels capable of producing 2000MWh of electricity annually will be installed on the building’s rooftop. It is estimated to result in a reduction of over 1000 tons of carbon dioxide emissions annually. The Busan CFC project is expected to create more than 2,000 new jobs.

Lotte Shopping plans to establish six OSP-based fulfillment centers nationwide by 2030, with the second center to be in the Seoul metropolitan area.

By Park Chang-young and Minu Kim

Copyrights Pulse by Maeil Business News Korea. All Rights Reserved.

Source: Pulse by Maeil Business News Korea (December 6, 2023)