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South Korea’s GS Retail consortium is set to acquire Delivery Hero’s food delivery app Yogiyo, a dominant player in South Korea. The acquisition gives GS Retail an integrated platform — from payment, delivery order and product sales — for its various retail businesses, including supermarkets, convenience stores and franchise restaurants. This intends to develop a cutting-edge O2O (Online-to-Offline) business model.
However, it is essential to consider the potential challenges that could emerge while integrating Yogiyo into the existing business model of the GS Retail consortium. Therefore, this article will focus on the more pressing challenges of such an acquisition.
S.Korea’s GS Retail consortium to buy Delivery Hero’s food delivery app Yogiyo
GS Retail is a South Korean major retail conglomerate, with a diverse portfolio covering retail, distribution, and the foodservice sector. The company is mainly known for its convenience stores and supermarkets, but also operates logistics businesses, department stores, and home shopping.
In April 2021, GS Retail announced that it would acquire Delivery Hero’s food delivery app Yogiyo, signaling a significant shift in its business strategy. This article will provide an overview of GS Retail and explore the potential challenges the company may face as it integrates with Yogiyo.
History
With an ambitious goal to improve the shopping experience for customers, GS Retail was established in 1988 as a subsidiary of GS Group. During its first year, it opened 13 branches, and has since grown into one of the leading players in South Korea’s convenience store market. Today, GS Retail manages more than 12,000 stores nationwide, with roughly 20 percent of total sales coming from food service.
Despite fierce competition from local and foreign rivals, GS Retail’s commitment to customer-centric innovation is reflected in its annual revenue growth and share price increase. Examples of its strategies include introducing a self-checkout system and “GS25 LIVE” – a loyalty marketing system that allows customers to collect points when purchasing their goods at participating stores nationwide, discounts for goods purchased online and receive virtual gifts each anniversary of their loyalty year.
To expand its presence beyond brick-and-mortar business models, the consortium announced the acquisition of Delivery Hero’s food delivery app Yogiyo in November 2019; Yogiyo boasts more than 12 million registered users and 81 percent market share in transactional orders in South Korea at that time. By successfully taking over Yogiyo’s operations, GS Retail will leverage this powerful platform to reach customers seeking convenience requiring no physical store visits. This will further help create new sources of growth for the company amid changing consumer behavior patterns during COVID 19 where customers now rely more on online delivery services than physical stores, thus strengthening its overall digital presence even beyond retail businesses.
Business Overview
GS Retail Co., Ltd. (Korean: GS리테일) is the retail arm of GS Group, South Korea’s third-largest conglomerate. The company was established in 1971 as Seoul National Store and changed its name to GS Retail in 1955. It has since become one of the largest retailers in South Korea with over 10,737 branches nationwide as well as a presence in Argentina and Mexico. In 2017 GS Retail reported sales of 88.5 trillion won ($78 billion), of which 73% came from their stores and 27% from their other businesses such as convenience stores, discount stores, emart discount outlets and department stores.
GS Retail made headlines recently by agreeing to purchase the South Korean food delivery app Yogiyo from Delivery Hero. By acquiring Yogiyo, GS Retail will gain entry into the rapidly growing food delivery market in South Korea which is estimated to reach 3 trillion won ($2.67 billion) by 2020.
However there are potential challenges for GS Retail with the integration of Yogiyo into their existing business model due to competition from other large companies such as Kakao Corp’s Foodplus service and WoowaBrothers Corp’s Baedal Minjok service who currently have over a 70% market share combined. Additionally, there could be difficulties obtaining needed licenses due to regulatory restrictions which may limit access to certain delivery services or make it difficult for them to gain a foothold in an already crowded field.
Overview of Yogiyo
In May 2021, S.Korea’s GS Retail consortium announced their plans to buy Delivery Hero’s food delivery app Yogiyo. Willem F Dag, the CEO of Delivery Hero, said that the sale will benefit both the companies and Yogiyo will help GS Retail expand their food delivery services.
In this article, let’s closely examine what Yogiyo is and the potential challenges for GS Retail with its integration.
History
In December 2020, GS Retail, South Korea’s largest retailer, announced it would set up a special-purpose company to acquire Delivery Hero’s food delivery platform Yogiyo. This news marked a major milestone in the country’s on-demand food market. Moreover, it was a victory for GS Retail, demonstrating the consortium’s ambition and ability to diversify its business beyond retail.
Yogiyo is one of South Korea’s most widely used meal delivery apps with accumulated users reaching 15 million. Along with the acquisition of Yogiyo, GS Retail group created GSNavi Service Co., LTD. Affiliates of GS Retail jointly own this company with its flagship business being the operation and management of Yogiyo. The move signals that GS Retail is scaling up its presence in the food delivery app market in South Korea and globally seeking opportunities in overseas markets.
Integrating Yogiyo into the existing ecosystem of GS Retail presents challenges given that Yogiyo operates independently from other e-commerce services within their portfolio such as Coupang Eats. Furthermore, amidst fierce competition among existing local operators including Baemin or Baedal Minjok, given the nature at which online services swiftly evolve alongside technology advances, it will be necessary for GSnavi to stay abreast of changes thus enabling constant adjustments across their business operations.
Business Overview
Yogiyo, a popular food delivery app originally controlled by Delivery Hero, has been acquired by South Korean GS Retail, also known as Shinsegae. The app lets customers browse local restaurants and order anything for delivery or takeout. Since its launch in 2012, Yogiyo has attracted millions of users and become a dominant player in the food delivery industry in South Korea.
GS Retail is part of the larger Shinsegae Group, one of Korea’s largest retail and logistics providers. The purchase of Yogiyo further expands GS Retail’s reach into the rapidly changing food delivery market. By leveraging existing resources such as its vast network of convenience stores, GS Retail intends to capitalize on opportunities Yogiyo provides and become an even more significant player in the industry.
One potential challenge GS Retail may encounter with integrating Yogiyo is maintaining customer loyalty during the transition period. Reducing customer churn rates could be essential for the success of both businesses in this rapidly evolving sector. To address this issue, both companies need to offer incentives encouraging customers to stay with them during this period to gain access to relevant services and products over time.
Challenges for GS Retail
South Korea’s GS Retail consortium has announced that it will acquire Delivery Hero’s food delivery app, Yogiyo.
The potential challenges GS Retail may face with integrating Yogiyo include difficulties adapting to new technology, competing with other delivery services, maintaining customer loyalty and balancing the cost of delivery drivers.
This article will detail these potential challenges and provide possible solutions.
Regulatory Challenges
The potential acquisition of Delivery Hero’s food delivery app Yogiyo by South Korea’s GS Retail consortium may carry with it some regulatory issues. Any merger or acquisition must comply with domestic and international competition and antitrust regulations. Primarily, this requires an assessment of the effects of the transaction on Competition in the affected markets, both domestically and internationally. This can be a complex process and requires expertise to ensure the rules are followed.
In addition, particular attention must be given to existing agreements between Yogiyo and other businesses catering for delivery services. Depending on their scope such agreements may require renegotiation or dissolution for the proposed acquisition to go ahead without violating clauses. Furthermore, suppose there are any unique assets or technologies related to Yogiyo. In that case, due diligence must be carried out to assess their value and determine which must be considered during proceedings concerning the acquisition.
It is also important for GS Retail consortium to consider whether any legal restrictions resulting from international trade laws could influence any prospective transaction adversely. Finally due regard should also be paid towards cultural considerations and how they might affect consumer attitudes towards GS Retail’s integration of Yogiyo into its business operations given some markets’ aversion towards foreign directed companies offering services regarding technological marketplaces such as those provided by Yogaio’s mobile app platform.
Competitor Challenges
Given the current market landscape, S.Korea’s GS Retail consortium faces various competition challenges when integrating Yogiyo (Delivery Hero’s food delivery app) into its business model. With over 30 online orders for delivery and takeaway per day, the current leader in Korea’s food delivery market is Baemin, followed by Yogiyo and Baedal Minjok. Additionally, several new players are trying to gain market share such as Coupang Eats, which recently received a large funding round in October 2020.
Moreover, Korea has a booming meal replacement industry with platforms like Woominjang providing easy access to ready-to-eat meals and snacks that appeal to commuters and busy office workers. These offerings can also be ordered online through Onnuri Foodnet or Delivery Blue for quick convenience. These challengers all have strong loyal customer bases which GS Retail will need to compete against if they wish to make a success out of Yogiyo integration and tap into this attractive sector of the fast-growing food delivery market in South Korea.
GS retail will further need to cope with challenges related to pricing strategies and promotional tactics that competitors employ since this significantly affects the entry barriers for new entrants. However, such obstacles can currently best be mitigated through intuitive customer engagement plans focusing on loyalty reward points as well as utilizing AI systems in collaboration between GS retail’s physical stores and its newly acquired digital subsidiary Yogiyo to facilitate an increase in sales efficiency through analytics on customer purchase behaviour, data from partner restaurants etc.
Technology Challenges
The South Korean GS Retail consortium’s proposed acquisition of Delivery Hero’s food delivery app, Yogiyo, brings up several potential technology challenges. GS Retail is a major player in South Korea’s retail industry, operating in convenience stores, supermarkets and department stores. Even though GS Retail has extensive experience with technology, integrating a new platform into its existing infrastructure could be challenging.
Firstly, GS Retail needs to develop a robust system to integrate the new platform with its existing systems to avoid disrupting customers’ orders and payment methods. It is also vital for them to ensure that the logistics system works well to satisfy customer demand. Furthermore, it will be important for them to ensure their operations are efficient by overseeing costs and ensuring they have enough human resources for customer support and managing stock levels effectively.
There may also be some difficulties in integrating new data management systems into their current setup. This includes protecting sensitive customer information and ensuring GDPR are followed wherever necessary. Finally, it will be important for them to consider building brand loyalty through increased user engagement on all their digital platforms – web and mobile apps – providing seamless shopping experiences across channels.
Financial Challenges
The South Korean GS Retail consortium’s intent to purchase Delivery Hero’s food delivery app Yogiyo could face several financial challenges, including rising costs for the business, potential delays in regulatory approvals, and unforeseen charges or fees. As part of the acquisition process, GS Retail must pay the agreed upon purchase price and other expenses associated with the transaction. In addition, due to currency fluctuations and other factors during the due diligence process, additional costs may arise that could reduce GS Retail’s return on investment.
In addition to shelling out a large sum for Yogiyo itself, there is also a risk that financing costs for this significant acquisition may exceed budgeted amounts.
Moreover, relevant regulatory bodies must clear any potential acquisition before proceeding. If competition-related issues arise or other non-financial concerns delay the transaction’s completion timeline, it could increase backflow costs due to delay in revenue projections and operational synergies. Any additional external bureaucratic intervention could further slow down or even freeze proceedings until they are satisfactorily resolved – leading to more time investment and more money spent on legal advice.
Financial risks therefore remain at play during every merger or takeover – whether in South Korea or globally – as long as a reputable body is not overseeing any alternative merger procedure methodologies which impose stricter rules on all parties involved within prior consent agreements as per industry/sectoral standards for mergers & acquisitions abroad. It is therefore important for key stakeholders within this transaction to ensure that all related due diligence is completed beforehand so that any financial risks are minimised before they have time to impact this megadeal.
Conclusion
The potential challenges for GS Retail with integrating Yogiyo (S.Korea’s GS Retail consortium to buy Delivery Hero’s food delivery app Yogiyo) are operational and financial.
Operationally, it requires integrating multiple systems and platforms and addressing any data and customer privacy compliance issues to ensure a seamless user experience. Financially, GS Retail must consider the acquisition cost associated with the purchase and any additional investments required for further integration or enhancements to meet market demands.
Ultimately, this decision requires careful analysis of current market conditions, reviewing resources and capabilities currently available within the consortium and thoroughly assessing risks associated with this major venture.
