After Getting Too Much Hurt

The Lotte Group is going to sell Lotte Marts in China as scheduled in that its brand image is unlikely to be recovered to that of the past even if business conditions improve.
The Lotte Group is going to sell Lotte Marts in China as scheduled in that its brand image is unlikely to be recovered to that of the past even if business conditions improve.

 

On March 30, senior Chinese diplomat Yang Jiechi met with South Korean President Moon Jae-in in Seoul as a special envoy of Chinese President Xi Jinping. There, the Chinese diplomat implied that the Chinese government may stop its THAAD retaliation, which has continued for more than one year to cause losses of more than two trillion won in Lotte Group alone.

During the meeting, they discussed resumption of group tours from China to South Korea, smooth sale of Lotte Marts in China, resumption of the Shenyang Lotte World Project, and electric vehicle subsidy issues. The Chinese diplomat mentioned that the matters are expected to be resolved in the near future.

Lotte Group, in the meantime, said that its development projects in Shenyang and Chengdu are still on hold and it is going to sell Lotte Marts in China as scheduled in that its brand image is unlikely to be recovered to that of the past even if business conditions improve. Lotte Group has taken the most significant hit among the South Korean retailers and travel agencies affected by the THAAD retaliation.

Since the retaliation, Lotte Group has focused more on Southeast Asian markets. For instance, it set up Indo Lotte and opened the iLotte online shopping mall with Salim Group in Indonesia last year. Lotte Duty Free is planning to open four stores in Southeast Asia this year and Lotte Chemical is planning to build a petrochemical complex in Indonesia.

Still, some insiders in the industry point out that Lotte will return to the Chinese market in the end as its sluggish business in China means something more than that. At present, management disputes between Lotte Group Chairman Shin Dong-bin and former Vice Chairman Shin Dong-joo are showing signs of resuming and normalization of business in China can tip the balance in the disputes.

In addition, the normalization can have a positive effect on the formation of a holding company structure via Hotel Lotte IPO, which has been indefinitely postponed since last year due to the retaliation. “If Lotte Duty Free and Hotel Lotte are recovered to some extent, the IPO will become possible next year,” one of them explained.

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