[비즈한국] With the confirmed closure of the Hyundai Department Store 069960 D-Cube City branch, concerns over a potential revenue gap are growing. Hyundai Department Store plans to offset this by opening three new branches by 2027 to drive sales growth. What stands out is that all of the company’s new site locations are in regional areas outside the capital. Contrary to the industry trend of offline retailers reducing regional stores, Hyundai Department Store is eyeing these regions for new opportunities.
While other department stores close regional branches, why is Hyundai doing the opposite?
Hyundai Department Store will end operations at its D-Cube City branch in Sindorim next June. This follows the failure to renew the lease agreement with IGIS Asset Management, which owns the building. IGIS plans to convert the D-Cube City site into office facilities. In March, they applied for architectural review to rezone the commercial site for office use, and it was recently confirmed that the application passed the review. A Guro-gu District Office official explained, "The review was completed in June. Approval for the rezoning has not been granted yet; it is currently being evaluated following consultations with relevant departments."
As the closure becomes official, concerns about a revenue gap are mounting. Given that the D-Cube City branch generated an average annual revenue of about 200 billion KRW, a decline in next year's sales is anticipated. The branch recorded 230.6 billion KRW in revenue last year and 242 billion KRW in 2022. Based on last year's figures, it ranked 14th out of Hyundai's 16 nationwide branches and 48th among the 70 department stores across the country.
Hyundai Department Store Group is determined to fill the revenue gap through its new openings. The Hyundai City Outlet Cheongju branch is set to open next year, followed by the Hyundai Premium Outlet Busan and The Hyundai Gwangju in 2027. Hyundai Department Store plans to invest 606.4 billion KRW into these three new locations.
The fact that all three upcoming branches are located in regional areas outside the Seoul metropolitan area is noteworthy. Among the "Big Three" department store chains (Lotte, Shinsegae, and Hyundai), Hyundai is the most active in pursuing new openings. The strategy seems to involve focusing on renovating existing stores in the capital region while seeking performance rebounds through new locations in regional hubs. A Hyundai Department Store representative stated, "We plan to expand our presence, centered on major metropolitan cities, to solidify our status as a nationwide department store chain," adding, "There are no plans for new openings in the Seoul metropolitan area for the time being."
This movement contrasts with the current atmosphere in the retail industry. As regional economic stagnation and population decline persist, retailers are generally limiting new regional openings and accelerating closures. Homeplus closed its Busan Yeonsan and Haeundae branches last year and shuttered its Busan Seomyeon branch this past February. Closures are also planned for Gwangju Gyerim, Busan Banyeo, West Daejeon, and Suncheon Pungdeok. E-Mart 139480 closed its Cheonan Pentaport branch this year, and NC Department Store has also shut down branches such as Seomyeon and Mega Mart Namcheon.
Industry experts analyze that while regional commercial districts are struggling, department stores focusing on the domestic market have little choice but to consider regional expansion to boost revenue. Seo Yong-gu, a professor of business administration at Sookmyung Women's University, explained, "Since department stores cannot easily expand overseas, regional expansion is the last resort for generating profit. There is a severe polarization in regional cities; while some districts are failing, hub cities remain vibrant. The industry will likely continue to design expansion strategies around these key hubs."
Is Hyundai Department Store solidifying its presence in the Chungbuk region?
A strategy of "securing" regional markets where they already have a presence can also be observed. Cheongju, North Chungcheong Province, where the upcoming Hyundai City Outlet Cheongju will be located, is a region where the Hyundai Department Store Chungcheong branch already generates stable revenue. Known as the only department store in North Chungcheong Province, the Chungcheong branch recorded 377.6 billion KRW in revenue last year, ranking 12th among Hyundai's 16 stores and 33rd nationwide.
While Shinsegae, Lotte, and Galleria focus on commercial districts in Daejeon and Cheonan, Hyundai has already captured the North Chungcheong market with the Chungcheong branch. According to a big data-based tourism report released by the Chungbuk Culture Foundation last month, the Hyundai Department Store Chungcheong branch was the top-visited destination among travelers in the region.
Professor Seo Yong-gu noted, "Entering a new regional market carries high risks. Companies prefer stable markets where commercial viability and sales potential are already verified. Hyundai's approach is to build a cluster by opening additional stores in regions where they have already established a market presence."
Hyundai Department Store is also considering applying its new complex shopping mall brand, "Connect Hyundai," to Cheongju. Connect Hyundai is a new retail format combining a department store, outlet, and entertainment facilities. The Hyundai Department Store Busan branch, which will reopen in September following its closure in July this year, has been designated as the first "Connect Hyundai," and there is speculation that this concept will also be applied to the Cheongju outlet.
The Cheongju area already seems to treat the entry of Connect Hyundai as a foregone conclusion. Apartments currently being sold near the site of the Hyundai City Outlet Cheongju are even using banners stating "Confirmed: Connect Hyundai Cheongju Branch" for their marketing. A sales representative shared, "We were informed that the opening of Connect Hyundai Cheongju is confirmed for next year. We have received many inquiries from customers interested in the brand."
However, a Hyundai Department Store representative responded, "Whether to apply the Connect Hyundai brand is still under review. Nothing has been finalized yet."