Retail in Asia

Featured

Lotte pulls out of China and focuses on Southeast Asia

Korea’s largest retailer Lotte has decided to pull out of China due to China’s persistent retaliation against Korean enterprises. Lotte intends to concentrate its efforts on Indonesia, Vietnam, Malaysia, and other Southeast Asian countries.

SEE ALSO : Lotte Duty Free revives global ambitions with Sydney opening

In 2012, Lotte opened its Chinese headquarters to oversee the group’s operations in the country. Lotte Shopping, Lotte Holdings, and Lotte Chemical each funded 70 percent, 15 percent, and 15 percent in the Chinese headquarters respectively. China was a significant market for Lotte Group, they intended to reach 200 trillion won (USD 157.1 billion) in sales by 2018, making it one of Asia’s top ten retailers.

Despite strong opposition from China, the Korean government placed a US Terminal High Altitude Area Defense (THAAD) anti-missile system on a Lotte golf course in Korea. Unsurprisingly, this move was not well-received by the government, which led to the commencement of stricter rules on Lotte’s Chinese companies. In China, Lotte Mart and Lotte Department Store shut down in 2018, followed by Lotte Chilsung Beverage and Lotte Confectionery in the following year.

A representative from Lotte stated that its Chinese headquarters will be closed in the first half of this year, and that the majority of its staff had already returned to Korea. The only option now is to have its business license revoked.

“We have practically completed the withdrawal of our business from China. We only have paperwork left. We are maintaining our stance on expanding our business in Southeast Asian countries such as Vietnam, Indonesia and Malaysia, but COVID-19 is still a problem there so we are closely watching the situation,” said an official at Lotte Holdings, which is the conglomerate’s parent company.

SEE ALSO : Lotte continues investing in digital transformation

Following the group’s restructure, a shift in resources on Lotte’s Southeast Asia expansion shall be expected. In 2013, Lotte Shopping established its first department store in Indonesia, followed by two new locations in 2014 and 2015 in Vietnam. From those three stores alone, the company made a profit of KRW 5.9 billion (USD 4.66 million) in the first quarter of this year. In addition to Indonesia, Lotte Mart has 49 supermarkets and 14 outlets in Vietnam. Between January and March this year, the group’s retail division made KRW 8.7 billion (USD 6.87 million) in the two Southeast Asian countries, up KRW 1.1 billion (USD 869 thousand) from the same period in the Korean market.