Retaliation Relaxed?
China is gradually relaxing its retaliatory measures online against Lotte over the deployment of a U.S. Terminal High Altitude Area Defense (THAAD) system in South Korea.
According to industry sources on May 31, Lotte's business in China has faced consumer boycotts after the group agreed to provide land to host the THAAD system in March. Accordingly, Baidu, China's No. 1 search engine, let Japanese e-commerce company Rakuten, instead of Lotte, be popped up when searching for Lotte. Many market industry sources pointed out that Baidu intentionally changed its search programs so that Lotte could not appear in search results after the group decided to turn over land for the THAAD deployment.
Now, three months later, however, the Chinese search engine posts Lotte related websites when its users type in Lotte in the search box. Recently, Baidu introduces the Chinese version of Lotte Duty Free at the top of search results. Chinese Lotte Mart website has been re-operated from the middle of this month after President Moon Jae-in took office.
Despite the fact, market experts say that it will take some time for Lotte to get out of the THAAD backlash as the Chinese government hasn’t lifted restrictions against Lotte Mart yet. Of 99 Lotte Marts in China, 74 are still closed after government inspections that found fire code violations, while 13 stores closed voluntarily. In short, 90 percent of the total stores remain closed. As Lotte Mart stores in China remain closed for three months, it has lost most of its customers to Carrefour, Walmart and other Chinese local stores.
In the meantime, Shinsegae Group Vice Chairman Chung Yong-jin announced on the 31st that the group has decided to completely pull its discount chain E-Mart out of China in 20 years after it first stepped into the Chinese market in 1997. Shinsegae currently operates six E-Mart locations in China.
There have been rumors in the retail industry that Shinsegae will shut down its discount stores in China but this was the first time that a Shinsgae executive confirmed the rumors. He hasn’t mentioned the exact time of withdrawal from the Chinese market but the E-mart stores will be closed at the earliest possible date, depending on local contract conditions for each store.
Market watchers say that the move was fueled by rising deficits as E-Mart failed to raise its brand awareness. There is also no signs of bouncing back. On top of the worsening profitability, anti-Korea sentiments among Chinese consumers over the deployment of the THAAD system seem to have dealt a fresh blow to the group’s performance.