Lotte, Chanel bury the hatchet

French brand to reopen cosmetics shop in the nation’s largest department store in August after feud


Chanel cosmetics have agreed to reenter Lotte Department Store three and a half years after it pulled out from the retail giant due to disagreements over store space and location.

The conflict between the two companies started when Lotte asked Chanel to downsize and relocate its cosmetics booth in 2008, pointing to its relatively low sales.

Chanel refused, accusing Lotte of getting back at the French brand for entering rival Shinsegae’s new store in Busan. The brand moved out of seven Lotte Department Store branches in January 2009.

The spat between the top premium brand and the nation’s largest department store drew much attention, damaging their public images.

Citing constant demand from consumers, Lotte recently agreed to have Chanel return to its previous spot on the first floor of the main branch in central Seoul. The two are also considering opening a Chanel cosmetics booth in another Lotte branch in the Seoul area.

The two are currently in talks over commission fees, size and location of the store. Cosmetics brands pay an average of 31 to 32 percent of their sales as commission to department stores. Chanel used to pay about 2 percentage points less to Lotte.

“Chanel cosmetics is expected to reopen around late August at the earliest as it needs time to rebuild and decorate its booth after the two sides reach a conclusion by the end of July,” Lotte spokesman Park Sang-woo said.

“Chanel is likely to be applied to the average commission rate for cosmetics brands, and like all other brands, it will pay for its own booth design.”

Department stores rearrange brand outlets twice a year in February and August based on the sales figures as of the end of December and June.

Chanel, which had the largest store space in Lotte among the cosmetic brands, had slid to No. 5 in sales in 2008 as shoppers turned away from Chanel to domestic high-end brands such as Sulwhasoo.

“It is standard procedure to warn brands that have sluggish sales and make adjustments accordingly. Chanel’s sales back then fell short of matching its store size and position compared to other import cosmetic brands,” Park said.

“Chanel’s revenue has grown since then, and customers continued to ask where Chanel was. Chanel also felt the need to reopen in Lotte, so the two sides made a win-win decision.”

Industry observers say that the two needed each other as Lotte is expanding abroad, especially in China, and plans key projects at home including building a 123-story Lotte Super Tower in Jamsil, southeastern Seoul, by 2015.

They note that Chanel must have felt the need to restore relations with the nation’s largest retailer to keep up with sales amid the protracted economic slump, while Lotte couldn’t give up Chanel as a major partner in its overseas business.

Spokespersons for Chanel were unavailable for comment.

By Kim So-hyun (sophie@heraldcorp.com)