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  • Lotte founder’s 50-year reign comes to an end

    Shin Kyuk-ho, founder and general chairman of the Korean retailer Lotte, has been removed from his company by shareholders, solidifying the succession of his second son, Shin Dong-bin, and coming closer to ending a family feud that started in 2015.

    Lotte is the country’s fifth-largest family controlled conglomerate, with 90 affiliates here and abroad.

    The shareholders voted in favor of denying the 95 year-old patriarch the position of board director of Lotte Shopping on Friday, which he has held since the affiliate was founded in 1970.

    The elder Shin’s term was terminated on March 20.

    Kang Hee-tae, CEO of Lotte Department Store, and Yoon Jong-min, Lotte Group’s human resource director, were newly appointed to the directors’ post at Lotte Shopping. Friday’s decision has completed the full control of the younger son, Dong-bin, who took his current role in 2011.

    “Lotte Group was able to grow with Shin Kyuk-ho’s leadership until now, but it is time for a new era under the new leadership of Shin Dong-bin,” said Lotte Group spokesman.

    Despite taking the role of chairman, Dong-bin was not allowed to make independent business decisions without the final call coming from his father, who held the board director position at most of Lotte’s affiliates.

    The father has been losing his board director position starting with Lotte International in 2015, followed by Lotte Confectionery and Hotel Lotte in March 2016.

    Lotte Confectionery is the founding company and the foundation of Lotte Group, while Hotel Lotte is the de facto holding company.

    Shin Kyuk-ho has been losing his title since he sided with his older son, Shin Dong-joo, who was trying to take full ownership of the group, and fired Dong-bin and six other executives at Lotte’s key operation in Japan.

    The founder still has several director positions, but his tenure is coming to an end and is unlikely to be extended. His role at Lotte Engineering & Construction is poised to be terminated on Sunday, followed by Lotte Aluminum and the Lotte Giants in coming month.

    Unlike his father, Dong-bin on Friday was appointed as the new director of Lotte Chilsung Beverage during the shareholders’ meeting, which industry insiders say is a necessary step to realigning the organization under his new leadership.

    Hwang Kak-gyu, who has worked with Shin Dong-bin for 27 years, was newly appointed as the CEO of Lotte Confectionery, a position that he will share with Dong-bin and Kim Yong-soo. The company said the decision was made to strengthen the company’s overseas business.

    Meanwhile, Dong-bin has been increasing his efforts to appease China, which has been bombarding Lotte’s business there as a retaliation against the Korean retail conglomerate’s decision to offer its golf course for the deployment of the U.S. antimissile defense system known as Thaad.

    In an interview he had with the Wall Street Journal on Thursday, Dong-bin said, “We definitely want to continue our business in China.”

    He added that he “loves” China and believe there has been a “misunderstanding.

    “If the government asks a private corporation like ours to give up land, then I don’t think we have the luxury of rejecting the government,” Dong-bin was quoted as saying in the Wall Street Journal.

    Lotte Mart, which runs 99 local branches in China, shut down 90 of them in the past couple weeks, partly forced by the Chinese government, which cited safety concerns, and also because of fierce protests in front of its stores.

    Lotte Shopping on Friday announced it will issue new shares worth 230 billion won and borrow 130 billion won in order to maintain its Chinese Lotte Mart branches.

    “Due to the suspension of Lotte Mart operations in China, there is no revenue generated, which we plan to compensate through capital increase,” Lotte Mart explained. “We need to pay local staff and purchase products.”

    Shares of Lotte Shopping jumped 2.61 percent on Friday, closing at 216,500 won.

     

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  • New Hotels Keep Popping Up in Korea’s Most Celebrated Beachfront Community

    New Hotels Keep Popping Up in Korea’s Most Celebrated Beachfront Community

    Busan’s Haeundae district is best known for its beach that attracts millions of visitors each summer. But it’s also a major MICE (meetings, incentives, conferences, and exhibitions) center, with the Busan Exhibition and Convention Center (BEXCO),and hosts major annual events such as the Busan International Film Festival. Under these conditions, competition between hotels is higher than ever.

    In 2019, Haeundae will welcome another global hotel franchise unit, Sheraton, which will be operated by Starwood Hotels & Resorts Worldwide. Starwood currently owns 11 brands including Sheraton and Westin, and operates over 1,300 hotels in some 100 countries. The new 260-room hotel will be located between two major beaches in Busan, Haeundae and Songjeong.

    Lotte Hotel has recently finalized plans to operate a luxury hotel inside the LCT Landmark Tower. The 101-storey tower, which is also located by Haeundae beach, is expected to be completed in 2019.Busan’s Haeundae district is best known for its beach that attracts millions of visitors each summer. (image: Wikimedia)

    Korean retail giant Shinsegae is in the middle of the planning process to build a hotel that offers a somewhat differentiated service by connecting services with shopping. The hotel will be built across from the company’s Centum City store, which is the largest department store in the world. 

    A Japanese company, Sega Sammy Holdings, has also established plans to build a luxury hotel (312 rooms) and a business hotel (470 rooms) on the opposite side of BEXCO. 

    Hotel Shilla, a Samsung subsidiary that operates hotels and duty-free shops, is building a 406-room business hotel, which is expected to open in 2017.

    Lotte Hotel has recently finalized plans to operate a luxury hotel inside the LCT Landmark Tower. The 101-storey tower, which is also located by Haeundae beach, is expected to be completed in 2019. (image: LCT)

    Amid such changes in the area, some businesses welcome the new development plans, while there are those that suffer from the increasing availability of new accommodations. 

    “The hotel market in Haeundae has reached its saturation point, and we have been struggling with our operations,” said an official from one of the hotels in Haeundae. “The government should limit the number of hotel approvals in the area.” 

    “We need a large number of hotels to host large-scale events,” said a MICE industry affiliate. “It’s too early to say that the hotel market in Haeundae is over-saturated. We need more hotels for the continued growth of the MICE industry.”

     

  • Hotel Lotte IPO expected to become S. Korea’s biggest offering

    Hotel Lotte IPO expected to become S. Korea’s biggest offering

    South Korean retail giant Lotte Group’s hotel unit said Thursday it will go public on the KOSPI market on June 29, which is expected to fetch over 5 trillion won (US$4.19 billion) to mark as the nation’s largest-ever initial public offering (IPO).

    Hotel Lotte Co. said in a regulatory filing that it will offer 47.85 million shares at a range between 97,000 won to 120,000 won per share.

    The offering is estimated to be around 4.6 trillion to 5.7 trillion won, and its medium range of price would surpass the record amount of 4.9 trillion sale by Samsung Life Insurance Co. in 2010. 

    Hotel Lotte, the world’s No. 3 duty-free operator, said it will use the fund to step up its duty-free business, hotel chain and theme park to offer comprehensive options to travelers.

    “Hotel Lotte will use the IPO fund to invest in expansion of duty-free stores at home and abroad to become the world’s largest duty-free operator,” the company said in a statement.

    The duty-free business is the company’s key source of income, accounting for 86 percent of its total sales.

    Starting from next month, Hotel Lotte plans to hold a series of deal roadshows in major cities, including New York, London, Singapore and Hong Kong, according to company officials.

    The listing of Hotel Lotte is one of the reform pledges that Lotte Group Chairman Shin Dong-bin has made as part of efforts to improve corporate image after a bitter family feud for control of the retail-focused conglomerate, which has sprawling businesses both in South Korea and Japan.

    The prolonged family feud has virtually come to an end as the founder’s second son and incumbent chief won shareholder support in March to tighten his grip on the nation’s fifth-largest conglomerate.

    On Thursday, Lotte founder Shin Kyuk-ho, who was undergoing a mental competence evaluation to prevent a legal guardian appointment, abruptly rejected the procedure and left Seoul National University in just three days of hospitalization.

    In December, the 94-year-old founder’s younger sister requested a Seoul court to name her as his legal guardian, claiming her aging brother was no longer capable of making consistent decisions.

    As a result, the aged tycoon was unseated from board seats at major affiliates during a shareholders’ meeting in March.

    Experts say Shin’s early discharge from the hospital has raised the likelihood of his sister becoming his legal guardian.

    “The case of dementia requires at least two weeks of hospitalization for examination. His discharge from hospital in just three days means that officials could not proceed with normal procedure,” Lee Hyun-kon, the lawyer for Shin’s younger sister, said. “The possibility of (the court’s) appointment of a legal guardian for Shin has risen as he could not prove that there’s no problem with his mental health.”

    Dong-joo has claimed he is his father’s hand-picked successor, but Dong-bin argued that his father is unable to make reasonable judgments due to mental health problems.

  • Hotel Lotte set to submit IPO application next week

    Hotel Lotte set to submit IPO application next week

    Hotel Lotte plans to submit the application to the Korea Exchange (KRX) on Monday for a preliminary regulatory review of its initial public offering (IPO), after clearing uncertainties surrounding the conglomerate’s management and other issues.

    The listing of Hotel Lotte is one of the reform pledges that Lotte Group Chairman Shin Dong-bin has made to assuage public disgust over a bitter family feud for control of the retail-focused conglomerate, which has sprawling businesses both in South Korea and Japan.

    Earlier this month, Lotte said its Japanese shareholders support the current leadership despite the ongoing succession feud. Japan-based Lotte Holdings is the largest shareholder of Hotel Lotte with a 19.1 percent stake.

    The KRX earlier said it is considering simplifying the screening process to facilitate its listing, using a “fast-track” system that cuts the review period to about a month.

    To take advantage of the speedy process, applicants should have over 400 billion won in equity capital and 700 billion won of annual sales for three years, along with other requirements.

    “If Hotel Lotte submits the application, we would be able to confirm the result by January,” a KRX official said, asking for anonymity.

    Hotel Lotte is pushing for the IPO despite the group losing one of its two duty-free stores in Seoul last month.

    Lotte kept a location in Myeongdong, a popular shopping district in downtown, but lost the operational license for another at Lotte World Tower in southeastern Seoul.

    The conglomerate earlier said Hotel Lotte is expected to have a market capitalization of around 10 trillion won ($8.6 billion) when it is publicly traded, but market watchers say losing one of its duty-free stores in Seoul in the recent competition could lead to that re-evaluation of its market value.

  • Hotel Lotte to apply for IPO next week

    Hotel Lotte to apply for IPO next week

    Hotel Lotte is reportedly set to file its application for listing on the nation’s main stock bourse early next week, according to sources Friday.

    They noted that the hotel unit of South Korean retail giant Lotte Group will submit its application to the Korea Exchange on Monday for a preliminary regulatory review of its initial public offering, which will mark the company’s debut on the stock market as early as March.

    Hotel Lotte in Seoul (Yonhap)

    The move was expected as Lotte Group chairman Shin Dong-bin has been pushing for listing Hotel Lotte on the Seoul bourse for months, as part of his reform plans to bring transparency to the governance structure of the group.

    An official at Lotte Group, however, denied the report, saying the date has not yet been fixed. He added that the application would be submitted as soon as possible.

    The listing plan came amid concerns that its market value would be lower than expected.

    The group expects the hotel chain to have a market capitalization of around 10 trillion won ($8.46 billion) when it goes public.

    But market watchers said Lotte Hotel’s recent loss of the operational license for a duty-free store at Lotte World Tower in southeastern Seoul could further drive down its valuation.

    Despite a negative outlook, they said the company would push for the stock listing as planned.

    The plan was released amid a bitter family fight over control of the retail business-focused conglomerate operating businesses both in Korea and Japan.

    At a parliamentary hearing in September, the chairman said the plan was approved by his father, Shin Kyuk-ho, with whom he had an ugly succession battle in August.

    In a bitter fraternal competition, Shin Dong-bin ousted his elder brother Shin Dong-joo and won control over the nation’s fifth-largest conglomerate.

    After a shareholders meeting, Dong-joo was stripped off the company’s registered executive position — leaving him with no foothold in Lotte Group Korea and Japan apart from the shares he holds.

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  • Lotte seeks more female managers

    Lotte seeks more female managers

    Lotte Group, a leading South Korean retail giant, vowed Thursday to nurture its female leaders to provide equal opportunities in its workforce.

    Group chairman Shin Dong-bin said in a forum that his conglomerate would increase female leaders to 30 percent of managers by 2020 from the current rate of 11 percent.

    “The group expects to have the first female CEO by 2020,” the chairman said, adding the group would continue to invest in building a family-friendly working environment.

    “More female talents are necessary for Lotte’s affirmative action plan to provide equal opportunities for members of minority groups,’’ Shin said during the fourth Way of Women, an internal annual event for female employees.

    About 500 female staff and executives in the group and its affiliated firms joined the event and shared their experiences and views for the development of female leaders.

    The conglomerate has adopted women-friendly policies, such as flexible working hours and support for career building.

    In its efforts to increase female talents, the company has continued to allocate 40 percent of annual job openings to women for the past few years, which has so far raised the rate of female managers to 11 percent from 1 percent in 2005.

    Lotte announced the new policy amid no signs of easing feuds among owner family members, including chairman Shin, over control of the conglomerate.

    Lotte said its Japanese shareholders support the current leadership despite the ongoing succession feud, in an effort to clear up uncertainties surrounding the preparation for listing its hotel unit.

    The listing of Hotel Lotte is one of the reform pledges that chairman Shin has made to assuage public disgust over a bitter family feud over control of the retail-focused conglomerate, which has sprawling business interests both in South Korea and Japan.

    The Korea Exchange, South Korea’s main bourse in charge of reviewing its initial public offering application, has demanded Lotte prove whether its corporate governance structure is stable enough to proceed with the current process.

    In response, Lotte said it has submitted a document showing that 60 percent of Lotte Holdings’ shareholders support the current leadership. Japan-based Lotte Holdings is the largest shareholder of Hotel Lotte with a 19.1 percent stake.

    “The Hotel Lotte IPO is expected to proceed without delay as major concerns have been cleared up,” a senior Lotte official said.

    “We will make efforts to complete its listing by the first half of next year.”

    The latest move came as Lotte has been mired in a leadership dispute between the group founder’s two sons ― Shin Dong-joo and Shin Dong-bin ― since last summer.

    The two sons had respectively controlled the company’s operations in Japan and Korea until earlier this year.

     

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  • Lotte Signs Five-year Exclusive O2O Deal In China

    Lotte Signs Five-year Exclusive O2O Deal In China

    Chinese B2C e-commerce website JD.com and South Korean retail giant Lotte.com have signed a strategic cooperation agreement and an exclusive agreement under which JD.com will become the sole strategic partner of Lotte.com in the Chinese mainland for five years.

    JD said that with the strategic cooperation agreement, Lotte Group’s products and services will enter the Chinese market via JD’s global shopping platform. In the future, the two parties will implement cooperation in tourism and service O2O.

    Global strategy is currently an important reason for Chinese e-commerce providers to team with international retailers. Lotte.com is responsible for the online sales of products and services of all subsidiaries of Lotte Group. Lotte.com will integrate Lotte Group’s branches to establish a “Lotte hall” on JD.com, covering Lotte Department Store, Lotte Mart, Hi-Mart, Lotte Duty Free, Lotte Hotel, and Lotte World.

    The “Lotte hall” will not only sell infant products, cosmetics, and fashion products, but also will offer household products and home appliances. Over the next three years, the two parties aim to expand their cooperation range to about 200,000 kinds of products.

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  • Chinese couples spend big in Korea

    Chinese couples spend big in Korea

    Korea is becoming a major destination for young Chinese couples looking to splurge on expensive items for their upcoming marriages.

    Chen Yi, 34, and Chai Xuefang, 30, who recently visited Seoul from Shandong province, China, are typical of the growing number of couples who are sparing no expense to make their big day special.

    The two bought two Vacheron Constantin wristwatches worth 100 million won ($84,350) each at the Hyundai Department Store in Apgujeong, southern Seoul. They also bought a two-carat diamond ring for 60 million won.

    “A lots of Koreans are preparing for their weddings at Cheongdam-dong [near Apgujeong in the posh Gangnam District],” said soon-to-be-wed Chai. “We plan to get wedding consulting [here in Seoul] exclusively for Chinese people.”

    Another Chinese couple, Yang Xiaoliang, 30, and his fiance Xu Jingjing, 27, last month bought a 10 million won Thom Browne suit for men and two Rolex wristwatches for the couple worth 150 million won each at the same Hyundai Department Store in Apgujeong. They purchased the items ahead of a wedding photo shoot at a studio in Cheongdam-dong.

    The Korean retail and hotel industry is taking notice of the growing number of Chinese couples who are spending big in Seoul to prepare for their weddings.

    They have become major customers who are spending large on high-end wedding gifts, including jewelry, wristwatches and designer suits and dresses. Majors stores are already catering to the growing demand.

    Hyundai Department Store’s Apgujeong branch plans to provide a wedding consulting program exclusively for Chinese couples, and have already enhanced other services for young Chinese customers. Since last month, they have provided a free delivery service where electronic appliances and furniture purchased by Chinese couples can be dropped off at their front door in China. The service has a limit of 30 kilograms (66 pounds) per person.

    Lotte Duty Free recently started a service where items purchased at its shops can be delivered from the Chinese airport to their homes.

    “We get a lot of inquires from Chinese tourists who come to Gangnam [District] to get wedding consulting,” said Lee Hyun-sook, a foreigner-exclusive concierge at Hyundai Department Store. “They shop after asking every detail, such as which brand Koreans most prefer for their own wedding gifts.”

    China Union Pay credit card purchases made by Chinese on imported brands such as Tiffany’s and Cartier soared 91.3 percent in the first eight months of this year compared to the same period last year at Hyundai Department Store. Purchases on furniture, electronic appliances and household goods saw a huge growth of 134.1
    percent.

    Shinsegae Group is widening its marketing strategy to attract soon-to-wed Chinese couples in its department stores and other major affiliates, including its discount store E-Mart and its hotel business Westin Chosun.

    Shinsegae Group invited two couples from Shenyang and Tianjin to Seoul, where they will get a wedding photo taken at the Cheongnam-dong studio that took wedding pictures for famous Korean actresses Jun Ji-hyun. They will also get the chance to experience a traditional Korean wedding ceremony at the Westin Chosun Hotel and shopping at E-Mart and the retail group’s other outlets. The cost is 15 million won per person.

    “We plan to secure the lead in grabbing Chinese couples visiting Korea to get wedding services during the most popular wedding seasons for the Chinese, which starts this month and leads up to the end of the year,” said Shinsegae CEO Jang Jae-young.

    Wedding gifts, including high-end wristwatches, jewelry and designer bags, accounted for 60 percent of all sales made by Chinese tourists at Shinsegae Department Store during China’s May Day, from April 25 to May 3.

    Hotels are also recognizing the growing trend.

    Plaza Hotel last month introduced a wedding package where a hopeful groom can make a proposal at the hotel’s restaurant.

    The package includes a studio wedding photo shoot that comes with makeup from a company that many Korean female celebrities like Han Ye-seul and Han Hyo-joo frequently use. The price tag on the three-day package is 7 million won including flight tickets.

    Lotte Hotel is offering a package targeted at Chinese customers that includes not only the wedding photo and makeup but also a proposal ceremony and spa. The cost for the three-day program is 11.8 million won.

     

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  • Shin calls for fresh goals for entire Lotte group

    Shin calls for fresh goals for entire Lotte group

    The 60-year-old chairman on Thursday became chairman of Lotte Holdings, the holding company of the Lotte Group in Japan, which was previously held by his brother Shin Dong-joo. This sealed his control of Lotte operations in both Korea and Japan. It is believed to be the first step in uniting the businesses in both countries.

    According to industry sources, Hwang Gak-kyu, president of policy coordination at Lotte Group, is already making adjustments to the chairman’s Vision 2018.

    In 2009, Shin teamed up with the Boston Consulting Group to devise long-term goals for the Korean retail giant to expand into a conglomerate that would be 10th-largest in Asia with annual revenues of 200 trillion won ($173 billion).

    “It seems that Chairman Shin has come to the conclusion that the vision needs to be readjusted, as the leadership has changed and the retail industry is also changing rapidly,” said a high ranking official at Lotte.

    Lotte Japan has far smaller revenues than Lotte Korea. In 2013, Lotte Korea generated 83 trillion won in revenue from 74 affiliates. On the contrary, the Japanese businesses only generated 5.7 trillion won in revenue from 37 affiliates.

    The biggest change in the vision is said to be “select and focus” and “synergy management.”

    Lotte said it is looking into the idea of choosing duty free shopping, hotels, chemicals and finance as core businesses and focus its resources on enhancing those businesses. Additionally, since food and beverages are key businesses in Lotte Japan, it plans to generate synergy with Lotte Shopping and Lotte Confectionery.

    For new growth engines, the retail conglomerate is likely to inject large amounts of investment, but the affiliates that are not picked will likely undergo heavy restructuring, and some will probably shut down.

    One of the key areas for Lotte is chemicals.

    On Friday, the day after Shin was officially made the head of Lotte Japan, he visited Lotte Chemical’s headquarters in Sindaebang-dong, southwestern Seoul, where he was briefed on business.

    On the contrary, investments in department stores and supermarkets is expected to decline. Lotte Group is expected to pursue merger and acquisitions in channels that combine offline and online shopping in order to raise synergy with existing branches and businesses.

    “Considering the size of changes that Lotte will undergo, we can’t say the funding we have is sufficient,” a Lotte official said. “Our investments will likely focus on quality more than on quantity.”