Lotte Hi-Mart will repair appliances customers already own for 50,000 won over two years

Fifty thousand won over two years is 25,000 won a year ^[2]. The payout ceiling is 1 million won a year ^[3]. A household that hits the ceiling in both years collects 2 million won, or 40 times its fee ^[1]. On claims alone, Lotte Hi-Mart breaks even only if the average plan holder draws less than 50,000 won across the two years, or 2.5% of the maximum ^[3]. The report in Seoul Economic Daily, which cites retail industry sources, does not include take-up, claim rates, the cost of a typical repair, or any age limit or inspection for machines already in the home ^[2].

The age question matters most. Earlier Lotte Hi-Mart care programs centered on new products bought in its own stores ^[12]. A new machine still under its maker's warranty is cheap to cover. An older one in a customer's kitchen is a different risk, and the people most willing to pay 50,000 won for unlimited claims are the ones who expect a bill. The 1 million won annual cap is Lotte's main limit on what that group can cost it ^[3].

Three outcomes fit these terms. If few holders claim, the fee is profit; the same report notes that retailers see such services as a new revenue stream in their own right ^[10]. If many claim but repair visits lead to replacement purchases, the payouts are a customer-acquisition cost, and Lotte Hi-Mart has said a cycle of return visits and repeat purchases is what it wants ^[5]. If many claim and few buy, Lotte has sold an underpriced repair contract.

Coupang set the price of the same idea at zero. Its furniture cover is free and limited to goods sold on Coupang ^[6]. It runs up to three years from delivery, with limits of 100,000 to 5 million won, and so far applies to brands including Iloom, Hanssem and Sidiz ^[7]. Coupang treats cover as a cost of making the sale. Lotte Hi-Mart charges for it and points it at appliances customers already own ^[12]. Neither is putting the money into discounts, consistent with the industry view, reported by Seoul Economic Daily, that price and range no longer separate retailers ^[1].

The furniture companies are adding labour and upkeep on goods already sold ^{[8] [9]}. "The push to expand care services in the appliance and furniture industries may create short-term cost burdens for companies, but over the medium to long term it is part of an investment in strengthening relationships with customers," an unnamed industry official told the paper ^[11].

I think Lotte Hi-Mart priced this as a retention cost. A single claim above 50,000 won in two years puts a customer ahead ^[2], and the number of claims is unlimited ^[3]. The counter-case is that most buyers never file, and the fee pays for the plan by itself ^[10]. The retention reading is wrong if plan holders replace appliances at Lotte Hi-Mart no more often than other customers do.