South Korea’s Lotte Closes Flagship Store on Alibaba’s Tmall

(Beijing) — South Korean retailer Lotte Group has closed its flagship store on Alibaba’s Tmall, China’s leading online marketplace, amid sliding local sales and cooling Sino-Korean relations.

Lotte’s Tmall store, opened in 2015, was closed on Jan. 12, according to a screenshot of a notice published by news portal Sina. Its store on another popular platform owned by JD.com is still operating normally for now, a JD representative told Caixin.

Lotte has recently closed three brick-and-mortar stores in China, its only overseas market where sales decreased in the last three months of 2016 from a year earlier due to stiff competition, according to its earnings report. The company has been in China for more than two decades, and has 115 supermarkets and five shopping malls in the market.

Such individual-store closures are common for foreign retailers in China, and the competitive environment has even prompted names like British supermarket chain Tesco and U.S. electronics giant Best Buy to leave the market completely. But reports of online shop closures by major foreign retailers like Lotte are far less common.

The conglomerate has met trouble several times in China recently as tensions have flared between Beijing and Seoul over a controversial missile defense system that South Korea is installing. South Korea says the U.S.-supplied system is purely defensive to protect it against attack from North Korea, but China believes the system could be used for spying.

Last December, work was halted on a multibillion-dollar real estate project, including homes, a shopping mall, theater, hotel and theme park, being built by Lotte in the northeast Chinese city of Shenyang. A person from Lotte’s Shenyang real estate arm told Caixin the pause was simply due to cold winter weather.

China accommodates the largest number of Lotte’s stores overseas, accounting for more than 60% of its footprint outside South Korea. Its new department store in Shanghai, jointly set up with Citic Group, is set to open in March.

Contact reporter Coco Feng (renkefeng@caixin.com)