Local retailers have started belt-tightening measures amid heightened economic uncertainty and toughened government regulation, industry sources said Wednesday.
Lotte Group allegedly implemented a belt-tightening policy since last week centered on its retail subsidies such as Lotte Department Store, Lotte Mart and Lotte Homeshopping.
Shisegae Department Store and E-Mart, retail units of Shinsegae Group, said they have entered the “Slim Work” system starting Wednesday, which aims at cutting costs by 20-30 percent.
Other retailers such as Hyundai Department Store and Homeplus also plan to continue a cost-saving policy after passing a disappointing summer season in sales.
“I would not say there has been any guideline delivered to each affiliate. Cutting costs is a natural measure at this time of economic uncertainty, including the widening debt crisis in Europe and fluctuating foreign exchange rates,” said a Lotte Group spokesperson.
The official added the situation of individual subsidies would be different.
Adding to concerns among retail businesses is the government’s growing pressure on commission cuts as part of shared-growth initiative between large and small companies.
In September, the Fair Trade Commission and CEOs of major retailers agreed to a 3-7 percent reduction in commission fees that traders have to pay to use their floor space.
Despite their tentative agreement, they have yet to narrow differences in specific action plans. Complaints escalated among retailers as the antitrust regulator recently hinted at a large-scale investigation within the month.
“It could be a 3-7 percent reduction in commission fees or 8-10 percent of operating profits as the FTC is said to be demanding. In any case, some impact is unavoidable,” said a department store official.
Another official said: “Discussions are still underway. But we have already been losing foreign investors who think the Korean government is intervening in the retail market.”
