Homeplus shortens delivery payment settlement cycle and pursues ‘Korean version of Trader Joe’s’ strategy

(Seoul = Yonhap News) Reporter Jeong Soo-yeon = Homeplus has introduced a method of settling payments up to three times a month to restore the trust of suppliers.

In addition, the company is pursuing a strategy to expand its supply of fresh food and groceries to become a Korean version of the grocery store, Trader Joe's.

However, as the existing unsettled amount reaches 500 billion won, the anxiety of suppliers still remains.

According to the distribution industry on the 6th, Homeplus resumed operations on the 13th of last month and introduced a method of paying product prices to many of its suppliers at intervals of at least 10 to up to 30 days.

For some fresh food companies, the settlement deadline was set at a maximum of 60 days.

Compared to the past, when Homeplus settled fresh food delivery payments every three months, the cycle has been shortened.

It is known that an advance payment of 100 million won was paid to some suppliers prior to receiving the initial quantity for business resumption.

This measure reflects the plan to restore the trust of suppliers by speeding up payment settlement and to build a ‘Korean version of Trader Joe’s’ focused on food products.

Accordingly, a significant amount of groceries, including fresh foods and convenience foods, are currently arriving at Homeplus stores. Aside from expensive wine and whiskey, alcoholic beverages such as soju, beer, and makgeolli also filled the shelves.

However, the anxiety of suppliers still remains as the delivery amount that Homeplus failed to pay is still piling up. The unpaid delivery amount amounts to 503.2 billion won.

An official from a supply company said, "After the first delivery in August, we have been paid for the quantity normally," and added, "If we receive a request to expand the quantity in the future, we will consider it, but we are concerned that there will be a situation where we will not be able to receive payment again."

He said, “Some companies are still suffering huge losses as they have not received payments worth billions of won.”

There are many skeptical views about the feasibility of the ‘Korean version of Trader Joe’s’ model pursued by Homeplus.

Homeplus, which has received approval for its rehabilitation plan from the court, plans to operate by making all of its duplex stores single-story and reducing the total area of ​​each store to about 1,000 pyeong.

Product types will also be condensed to focus on foodstuffs and daily necessities with high turnover, and the PB ratio will be increased.

The plan is to follow the model of Trader Joe's in the U.S., which reduced store size to 10-30% of competitors' size and condensed products to a small number of elite PB products.

The problem is that competition for PB brands in the domestic hypermarket market is already fierce. E-Mart operates under the ‘No Brand’ and ‘Peacock’ brands, while Lotte Mart operates under the ‘Today’s Good’ and ‘Yorihada’ brands.

On the contrary, Homeplus' PB 'Sim Plus' is evaluated as having lower presence and preference compared to these brands.

The number of products is only about 1,000, and it is difficult to launch a new PB brand.

An official in the distribution industry said, "It is unclear whether Homeplus, which has received approval for its rehabilitation plan, will be able to prove its viability," and added, "Compared to other companies, it will have to secure price competitiveness and customer trust at the same time."