Successful partnerships between the worlds of fashion and finance are rare. But when ORIX and TOPTEN joined forces in South Korea, they created an innovative collaboration that has revitalized the shopping scene in Busan, the country’s second-biggest city and southern hub. With ORIX’s customer-centric approach to real estate and TOPTEN’s affordable, high-quality clothing, this partnership is setting a new standard for collaborations in the industry.
Healthy Assets Lead to Healthy Relationships
In 1975, ORIX Group made its entry into the Korean market, and since then, has prided itself on attaining sustainable growth by prioritizing asset health over expansion and managing its operations according to a rigorous set of criteria. The company started in leasing through a joint venture with a local financial institution but soon diversified into more general asset finance and installment sales. Following this, ORIX extended its footprint in South Korea by entering into private equity investments and engaging in real estate development.
Established in 2014, OREK (ORE Korea Ltd.), the property arm, engages in the business of leasing land for an extended period from landowners. The company develops buildings tailored to the needs of tenants and offers them on a long-term lease basis. At OREK, the focus is not solely on constructing buildings with the expectation of capital gains but rather on the pursuit of stable rental income.
“Despite initial concerns, we have found success in the Korean market as some landowners are more open to repurposing idle assets and seeking stable rental income”, explains Ho Jin Lee, General Manager at OREK. “Working closely with our tenants to understand their needs and develop buildings that meet those needs has not only allowed us to build long-term relationships but also established our reputation as trustworthy partners.”
The company’s foray into the Korean real estate market began through cooperating with a Japanese SPA (specialty retailer of apparel) brand and has now led to successful partnerships with local brands including TOPTEN, the largest SPA brand in South Korea.
Stand out and Innovate with Style
TOPTEN’s success in the fashion industry is based on a wide range of high-quality clothing at affordable prices, which appeals to customers of all ages: “GoodWear” – ‘offering better clothes for a better life’, as the company slogan puts it.
The company owns several overseas factories enabling in-house sourcing and production, while its expansion into commercial facilities, roadside locations, super-sized shopping malls, and regional cities has contributed to its rapid growth.
As of September 2023, TOPTEN operates 313 stores in South Korea, with 77, a quarter, being roadside locations. TOPTEN is also investing in new technology to adapt to changing times and enhance operations. The innovative brand utilizes an RFID (Radio Frequency Identification) technology for efficient inventory management and is increasingly shifting to AI for real-time inventory checks and to automate logistics.
At the helm of TOPTEN’s growth and partnerships is the director of TOPTEN Suk Kyun Kang. “As TOPTEN looks ahead, 2024 is set to be a crucial year for the brand as we aim to achieve 1 trillion KRW [$760m] in sales as a domestic brand in South Korea. The recently opened Busan Sinpyeong Store is expected to play a significant role toward this ambitious goal”, Kang said.
Joining Forces to Revitalize South Korea’s Shopping Scene
In August 2023, OREK opened the Busan Sinpyeong complex, boasting 2,600 Japanese tsubos (8,600 square meters) of land and consisting of four newly-constructed stores, each occupied by a single tenant. The four well known brands in this property are all Korean and include two SPA brands (TOPTEN and POLHAM), one casual men's clothing brand (STCO), and one cafe chain (A TWOSOME PLACE).
Mr. Lee who oversaw the project, from negotiating the lease terms and finding the tenants to managing construction schedules, recalls: “We were initially approached by the property owner who, impressed by the positive reception of our existing project across the road, wanted to make use of their idle property”.
Since TOPTEN was an anchor tenant in other mixed-use facilities managed by OREK, Mr. Lee approached the company right at the start of the project. For its part, the clothing group was happy to be asked, says Mr. Kang: “ORIX provides significant advantages to TOPTEN through its synergy among tenants, well-executed design and construction, on-time building delivery, and strong building management capabilities”.
Mr. Kang also played a role in ensuring the store held a connection to the local area, with zones to promote Busan's natural heritage within the store and tailored Busan-themed T-shirts produced specifically for this complex.
The development is located along a major road, providing high visibility, and its 100 parking spaces are extremely rare in Busan's hilly terrain. The opening was a hit and sales at all four tenants are exceeding expectations.
Building off this momentum TOPTEN plans to explore further collaborations with OREK to expand its roadside store presence, especially in cities with populations of less than 100,000, to enhance convenience for residents.
Threading the Needle for Success
While OREK has developed and managed a dozen roadside commercial facilities, the Busan project marks an important milestone as the first-ever commercial complex consisting exclusively of Korean tenants. For Mr. Lee, this is only the beginning. “Our business has been steadily gaining recognition in South Korea. Looking ahead, there’s potential for expansion into different types of real estate, including logistics warehouses, data centers, and film studios”.
Navigating the intense competition in South Korea to acquire talent and establish the organizational structure needed to develop these new ventures will be no easy feat. By capitalizing on the experience and specialized knowledge within ORIX Group, companies can adeptly sidestep the risk of overlooking valuable opportunities.
Being part of a global brand has many merits, and OREK has found that owning a professional team in baseball-obsessed Korea is like hitting a home run in business negotiations, as companies that own teams are considered top-tier enterprises. Lee jokingly puts it, "We definitely cash in on the popularity of the ORIX Buffaloes, especially given the team has had several Korean members in the past."
Access to a global network of resources and expertise has enabled ORIX to rapidly expand in South Korea and partnerships, like the one with TOPTEN, have played a crucial role in this growth – and will continue to do so.
