SEOUL, Sept. 15 (Korea Bizwire) – Lotte Group’s decision to pull its supermarket chain out of China after months of politically motivated retaliation from the Chinese government is triggering fears it could cause a domino effect among South Korean companies.
After being subject to incessant retaliation – including raids by safety authorities from the Chinese government – over its involvement in the deployment of American THAAD anti-ballistic missile defense systems, Lotte has finally given in to China’s pressure and initiated the sales process of its supermarket business in the Chinese market.
To many South Korean firms, Lotte Mart’s withdrawal, along with E-mart’s similar decision and the poor sales performance of Hyundai Motor, paint a much bigger picture, and give a glimpse into what the Chinese economic retaliation could look like if it goes on for much longer.
Before the South Korean retail giant came face to face with the grim decision of withdrawing its supermarket business from China, Lotte spent months trying to save its business, injecting 360 billion won back in March in an effort to cushion the damage caused to its Chinese subsidiary.
Shin Dong-bin, the CEO of Lotte Group, even resorted to an emotional marketing ploy, including an interview with the Wall Street Journal during which he expressed his love for China and intention to continue Lotte’s business there.
Posters were plastered on Lotte Department Stores and 7-Eleven stores in South Korea, with messages that read in Chinese that the company understood the frustration of Chinese people and was willing to wait for Chinese customers to open their hearts again despite the political dispute between the two countries, a move that had little to no impact.
It’s not just the retail industry that is in fear of following in the footsteps of Lotte Mart, as the economic damages caused by the political tension have been spilling out into other South Korean companies across the cosmetics, automobile and food industries, including Amorepacific, Hyundai Motor and Orion Corporation, all of which have seen their Chinese sales drop precipitously in recent months.
“The issue of the THAAD system in the South Korean economy that caused the crisis at Lotte Mart is not something that a company can solve,” a source close to Lotte Group said.
Hyunsu Yim (email@example.com)