Lotte Group is caught up in a fog. What will happen to Lotte Duty-free Shop?
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Lotte Group is caught up in a fog. What will happen to Lotte Duty-free Shop?
  • 김재영
  • 승인 2015.07.30 11:43
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Due to the power struggle at Lotte, what will happen to Lotte Duty-free Shop, No. 1 in the industry?

On July 27 the eldest son Shin Dong-joo, chairman of Lotte Japan, and the eldest daughter Shin Young-ja fired Shin Dong-bin, chairman of Lotte Korea and six directors of Lotte Holdings in Japan with the blessing of their father Shin Kyuk-ho. Even before this first rebellion started in earnest, it seems that chairman Shin Dong-bin is coming out a winner. At an emergency meeting held on the following day, the board nullified the dismissal of chairman Shin Dong-bin and related directors, and sacked Shin Kyuk-ho, the group's founder as chief executive and general chairman only a day after the firing of his second son.

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Lotte Korea, which Shin Dong-bin controls, has become more than 20 times bigger than Lotte Japan, and is widening the gap. Lotte Korea has been making inroads into distribution, confectionary and petrochemistry, and aggressively expanding. This incident proves that Shin Dong-bin has been continuously increasing his influence on Lotte Holdings in Japan.

People have both concerns and expectations about the future of Lotte Duty-free Shop, the largest in Korea, at the same time due to these circumstances. Lotte officials are reticent on the subject, but it is clear that, as Lotte Holdings is the largest shareholder of Hotel Lotte, it cannot but be affected one way or another.

Until now, Hotel Lotte has been making big decisions under the direction of general chairman Shin Kyuk-ho. The duty-free shop division, belonging to the hotel, is no exception. In consideration of the current status, it is highly likely that chairman Shin Dong-bin will become more influential in Lotte Group, and have more control over Hotel Lotte as well. As a matter of fact, Shin Dong-bin announced a plan to have Lotte Group in Korea and Japan jointly launch the duty-free shop business in Thailand under the banner of ‘One Lotte, One Leader.’ The second son has been intent on accelerating global expansion by espousing an aggressive approach to the duty-free shop business, e.g. trying to open duty-free shops in Osaka and Tokyo.

The question is the intention of Shin Young-ja. She has been leading the growth of the distribution business of the group since the 1980’s when she took the helm of Lotte Department Store. She has been operating the duty-free shop business, which is considered distribution business, in Hotel Lotte, exercising powerful influence.

The industry says that she joined the rebellion as her younger brother, chairman Shin Dong-bin, is spearheading the management of Lotte Korea, and she is losing ground. Shin Young-ja seems to have concluded that the Shin Dong-joo regime will be advantageous to her attempt to become more influential. Considering that chairman Shin Dong-joo has a weak presence in Korea, she may believe that Lotte Korea will have to be halved in the mid-to-long term. On top of that, as the power struggle intensifies, even if Shin Dong-bin comes out a winner, she will pack more gains in shopping or duty-free shop business, sitting at the negotiation table.

Meanwhile, it is also possible to predict that Shin Dong-bin will bring chairman Shin Kyuk-ho and president Shin Young-ja to account, and put them farther away from the frontline. It is clear who is responsible for the deficits of the overseas subsidiaries that were established in the past and the worsening profitability due to the astronomical rent of KRW3.6 trillion for the 3rd Duty-free Shop in the Incheon International Airport. The de-facto ‘practical defeat’ in the competition with Shilla in the bidding for Changi Airport and Incheon International Airport strengthens the case.

Until the transfer of management rights is over, it seems that the entire Lotte Group will continue to be in confusion. However, final decisions must be made in such a way that Lotte will not be confined in Korea, but become Global Lotte, and the same can be said about the duty-free shop business. As Lotte Duty-free Shop aims to become No. 2 in the global duty-free shop industry by 2018, a global growth engine must come out of this fight no matter what the result may be.


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