Since the launch of ‘Raemian’ in 2000, it has been a powerhouse in the maintenance business for about 10 years.
Standing out in Gangnam maintenance project in Seoul… At one time, 30% of the order volume was swept
There is tension in the maintenance business market. This is because Samsung C&T announced an active move to win orders with ‘Next Home’ at the forefront. How will Samsung C&T’s strategy change change the landscape of the maintenance business? Accordingly, Media Pen examines the maintenance business of Samsung C&T throughout the past, present and future. [편집자주]
[삼성물산 정비사업 연대기-①과거]Birth of ‘Raemian’ and ascending to the throne
▲ Mapo Samsung Apartment, the first reconstructed apartment in Korea./Photo courtesy of Samsung C&T
[미디어펜=성동규 기자]Samsung C&T took the first step in the maintenance business in 1994 when it reconstructed Seoul’s ‘Mapo Jugong Apartment’ into ‘Mapo Samsung Apartment’.
The reconstruction of Mapo Jugong Apartment was very symbolic as it was the first maintenance project in the construction industry. Samsung C&T made a bet with bold investments, such as investing construction costs that exceeded the sale price at the time. Although the construction company suffered a loss, the response of the occupants was very satisfactory. It was at this time that the image of ‘Samsung C&T = top-notch apartments’ was solidified.
In 2000, the modifier ‘first’ was added to Samsung C&T again. It was the first time that the housing brand ‘Raemian’ was applied to Guseong 1st Apartment in Yongin, Gyeonggi-do, which was sold in January of that year. Since then, Samsung C&T has emerged as an emerging powerhouse in the maintenance business market. In 2000 alone, it won construction rights for a total of 18 complexes, winning consecutively in the competition for reconstruction and redevelopment orders.
An unexpected ordeal came to Samsung C&T, which was playing solo without any roughness. In October of the same year, at the construction company selection general meeting for the ‘Daechi Jugong 2nd Complex’ reconstruction project, Dongbu Construction, which was evaluated as one lower score, had to suffer with a difference of only 31 votes. Members chose Dongbu Construction, which offered a relatively low project cost. Some critics say that Samsung C&T’s insistence on building high-quality apartments actually got in the way.
The bitter experience served as an opportunity to further refine Samsung C&T’s order-winning strategy. Samsung C&T eschewed unnecessary wars of attrition and modified its strategy to select profitability-oriented orders.
In 2001, a typical example was giving up the order one day before the general meeting of union members while continuing to compete with Lotte E&C for the right to reconstruct the ‘Cheongdam-dong Samik Apartment’ in Gangnam-gu, Seoul.
An official from the construction industry said, “In the early 2000s, the competition for maintenance projects was so fierce and the related laws were lax, so it was a time when the bloody competition was intensifying.” I didn’t have to jump into the pandemonium,” he explained.
In fact, Samsung C&T maintained its No. 1 position in the maintenance business by raising orders of 2.2836 trillion won in 2001 and 4.5 trillion won in 2002, even while taking a selective order strategy. In the first half of 2003, it secured more than 50% of the reconstruction projects in the Gangnam area through a substantial order strategy, securing 3-4 years worth of work.
▲ History of Raemian brand image change./Photo = Courtesy of Samsung C&T
◆ From ‘regulation strengthening’ to ‘financial crisis’… Changed Order Situation
In 2002, the government’s stricter regulations brought an ice age for the maintenance business. As real estate prices skyrocketed, the government came up with real estate stabilization measures and drastically strengthened regulations on reconstructed apartments. In July 2003, the following year, the ‘Urban and Residential Environment Maintenance Act’ was also enacted. The existing reconstruction promotion committee stage, where the contractor was selected through a private contract, has been changed to require a general meeting resolution through competitive bidding.
The construction industry predicted that the maintenance business market would change. In particular, there were voices of concern that the status of Samsung C&T, which had been dominating in order competitions every time with the ‘Raemian’ brand power, might be shaken.
An official from the maintenance industry recalled that time, saying, “The market landscape, which had been monopolized by a few large construction companies, including Samsung C&T, has changed since the enforcement of the Provincial Justice Act.”
It was in 2005 that the maintenance business market began to regain its vitality. With the enactment of the ‘Special Act on Urban Renewal Promotion’, a new town frenzy was blown, including the designation of reorganization promotion districts across the country. As the profitability of reconstruction projects deteriorated due to the government’s strict regulations, construction companies focused their efforts on winning redevelopment orders as a new breakthrough in the housing business.
Despite intensifying competition for maintenance projects, Samsung C&T won orders for 20 out of 66 major redevelopment complexes in Seoul as of the first half of 2005. It concentrated on promising orders for new towns such as Mia District 6‧12, Jeonnong District 6∙7, Dapsimni District 16, and Gireum District 10.
In the same year, Samsung C&T also introduced ‘Hestia’, a service brand, for the first time in order to enhance competitiveness in receiving orders. Hestia services include a complex day event (Let’s Play), service focused on relieving tenants’ inconvenience (Let’s Stay), providing opportunities to experience hobbies (Learn), social contribution activities with Raemian residents (Together), etc. 4 It operates in two categories.
An official from Samsung C&T said, “As Hestia provides various experiences and services to tenants, the concept of customer service has been expanded by expanding the scope of service that was limited to simple apartment management in the past.”
◆Survival strategy modified at the beginning of the age of bleeding competition
In 2006, competitors who had developed their capabilities began to counterattack. That year, GS E&C, which won orders for 31 complexes, rose to the throne of maintenance business. Samsung C&T, which had been strong in redevelopment and reconstruction orders, ranked 7th with only 17 orders.
At this time, an event that would revolutionize the maintenance business market was approaching. In the summer of 2007, the worst financial crisis since the Great Depression occurred in 2008, starting with the collapse of the housing market in the United States due to the increase in subprime mortgages.
Faced with an unprecedented crisis, domestic construction companies hurriedly lowered the proportion of housing projects, including maintenance projects, and increased the proportion of large-scale plant projects. At the same time, he put his life and death on business diversification by turning his eyes to overseas markets.
The New Town project, which seemed to give birth to a ‘golden egg’, entered a steep downhill due to the financial crisis. Samsung C&T rose to prominence again in 2008 when the government drastically eased reconstruction regulations when the construction industry shrank dramatically.
The water garden was also in Gangnam-gu, Seoul. In the first half of that year, Samsung C&T obtained construction rights for 11 complexes (10 single orders and 1 joint order) out of a total of 29 complexes in Gangnam-gu. In Songpa-gu, which is adjacent to Gangnam-gu, it was also selected as a construction company in 4 out of 5 complexes (1 single, 3 joint).
In 2009, the maintenance business market hardly recovered in the aftermath of the economic crisis, and excessive competition between construction companies intensified. It was also around this time that Samsung C&T changed its strategy to digest only the orders received in the past.
Another official in the maintenance industry said, “There have been many sluggish maintenance establishments since 2009, such as replacing or failing to select a construction company.”
He added, “In the case of Samsung C&T, which has already secured a sufficient amount of orders, there was no need to jump in like a moth.”
[미디어펜=성동규 기자] ▶View other articles
