South Korean Retailer Strains to Win Back Chinese Customers

South Korean Retailer Strains to Win Back Chinese Customers
By Steve46814 (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0) or GFDL (http://www.gnu.org/copyleft/fdl.html)], via Wikimedia Commons
What you need to know

Nearly 90 Lotte stores in China have been shut down amid China’s boycott of South Korea.

The Lotte Group announced on March 24 that it plans to raise US$320 million through loans and the sale of shares to save its China operations, reports Yonhap News Agency.

The South Korean retailer has been hit by a Chinese boycott of many South Korea goods since late February. It has already replaced two South Korean heads of Lotte Mart in China with Chinese executives as part of a series of measures to lure back Chinese consumers.

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Chinese state media have riled up consumers to boycott South Korean products as retaliation for the deployment of a U.S. Terminal High Altitude Area Defense (THAAD) system on South Korean soil. Beijing also issued a ban on the sale of travel packages to South Korea on March 3.

The U.S. and South Korea say that the THAAD anti-ballistic system is being deployed for protection against incoming missiles from North Korea, but Chinese officials worry that the system may be used against China.

Lotte became the main target of Chinese anger after announcing it would hand over land in South Korea for storing a THAAD battery.

Nearly 90 Lotte Mart stores, representing 90 percent of Lotte’s retail operations in China, had to close temporarily as Chinese consumers staged protests. Some 60 Lotte stores received business suspension orders from Chinese authorities, while the company voluntarily suspended operations of another 20 stores.

The suspension has hit the South Korean retailer's Chinese operations hard. Lotte is predicted to lose US$104 million in Lotte Mart revenue if the suspensions last for a month, reports Yonhap News Agency.

Lotte’s suppliers in China have requested payments from the company's head office in Beijing, due to fears the retailer would pull out of China.

The company has denied allegations that it would leave the Chinese market and has started a series of reconciliatory efforts.

Lotte Group’s chairman Shin Dong-bin, in an interview with The Wall Street Journal, expressed his love for China and said that the Chinese reaction to the THAAD deployment came as a surprise. Shin also told the WSJ that as a privately owned company, it was impossible for Lotte to refuse a government request.

Lotte has also put up signs in Chinese with the slogan, “because we understand, we will wait,” outside its stores in Seoul, Korea Joongang Daily reports. The signs take inspiration from a Chinese idiom “an inch of time is worth an inch of gold,” changing the saying to “ten inches of time is worth ten years of heart,” referring to the 10 years Lotte has been operating in China. The sign continues, “Lotte has always held you in our heart, that is why we understand you.”

Chinese reactions to Lotte’s efforts have been less than welcoming. State-run Global Times called the signs an attempt to “woo” the Chinese.

Disdain for the signs has been expressed online with netizens saying Lotte should continue to wait.

Lotte employs 20,000 people in its Lotte Mart stores in China, and the Maeil Business News Korea reports that more than 50,000 jobs would be impacted if the company pulls out of China.

Meanwhile, fearing a backlash from the Lotte boycott, a Lotte cinema chain co-owned with Chinese businesses has also removed the characters of the company's name, “le tian (樂天),” from its buildings and online ticketing system.

Editor: Olivia Yang