HomePlus Looks to Follow Trader Joe’s Business Model to Try and Recover in the Korean Market
I don’t know if this is going to work because Trader Joe’s has some significant loyalty from its customers that HomePlus has likely lost a lot of:
Embattled hypermarket chain Homeplus is pinning its revival on a new type of store modeled on US grocery chain Trader Joe’s, a leap of faith that has stirred both hope for a business remade and skepticism that a company on the edge of bankruptcy has the footing to pull it off.
Homeplus laid out the plan last week, after the Seoul Bankruptcy Court extended its rehabilitation deadline to Sept. 4. Once 200 billion won ($136.8 million) in debtor-in-possession financing arrives, the retailer intends to reopen all 67 temporarily shuttered stores, converting them into single-floor locations of roughly 3,305 square meters centered on food, private-label goods and everyday essentials.
Taking cues from the US grocery chain’s smaller-format stores, which stock roughly 4,000 items compared with the 30,000 to 50,000 typical of a conventional hypermarket, Homeplus hopes a leaner assortment weighted toward its private label, Simplus, will cut procurement and inventory costs.
“Trader Joe’s is a private-label-focused supermarket selling primarily food and daily necessities in optimally sized stores, where more than 80 percent of the products sold are its own brands,” the company said in a statement.
As appealing as it sounds, Homeplus’s shot at replicating the Trader Joe’s model depends on more than store format, analysts say, with the US chain’s success owing to a combination of strong product curation, brand loyalty and consumption patterns unique to the American market.
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