After record earnings, large-scale walkout looms at Chanel Korea

After recording its best earnings last year, Chanel Korea is under mounting pressure to share more profits with employees in a fairer way, with its unionized workers threatening to go on a full-scale walkout ahead of its peak holiday season later this month.

According to the Chanel Korea Union, affiliated with the Korean Federation of Service Workers’ Union, its members working at department stores and duty-free shops already staged a partial walkout over the past weekend. The union said if their demands are not met, they will go ahead with their planned walkouts for every weekend of September as well as during the Chuseok holidays, when luxury goods see some of their highest sales of the year.

Out of some 1,500 Chanel Korea employees, almost 30 percent, or 400 employees, are union members. Currently, all 400 members are joining the strike.

"Chanel Korea is unfairly distributing its income. Most of the company's net profits were paid as dividends to Chanel's head office," Han Ji-yoon, the union head, told The Korea Herald.

Running high on the nation’s luxury fever, the French fashion house posted 1.59 trillion won ($1.19 billion) in sales and 412 billion won in operating profits in Korea last year, up 30 percent and 66 percent, respectively, from a year ago. In particular, its net profits soared 74 percent to 311.5 billion won during the same period.

However, the union claimed that most of the record earnings were spent on paying hefty dividends to the Chanel headquarters in Luxembourg, rather than elevating investments in Korea or improving the working conditions of local employees.

According to the Korean unit’s regulatory filing, the company allocated 295 billion won, some 95 percent of its net profit, as dividends to the head office this year. The amount more than tripled from the 69 billion won paid a year ago.

The latest strike comes as the National Labor Relations Commission decided in June to suspend the collective bargaining process between Chanel Korea and its union after the two parties failed to resolve their differences. Citing the upbeat sales, the union called for a two-digit growth in wages, but management offered a 5 percent increase.

“The union has (now) rejigged its proposed 8.8 percent, but Chanel Korea has since closed all means of negotiation. There is no way to communicate with management as of now,” Han said.

Adding to the wage hikes, the union is also calling for a fairer salary system based on the number of years worked and experience.

In a recent round of new recruits in July, Chanel Korea announced the monthly base salary for newcomers, which was higher than that for existing employees who have worked for more than 10 years.

“At most, the new recruits’ monthly salaries differed from existing employees’ salaries by 400,000 won,” said the union head. “Managers who earn less are having difficulties in effectively managing junior members. The operational structures at each Chanel outlet are currently disorganized.”

Chanel Korea reportedly explained that such disparity in monthly salaries was unavoidable because of inflation and they had to raise the base pay to attract new employees.

A Chanel Korea official declined to comment on the ongoing strike, citing the sensitivity of the issue.

The official dismissed speculation about the dividends payouts, saying “We cannot discuss the allocation of dividends. But this amount is a consequence of our strong and healthy balance sheet, maintained year after year thanks to the significant investment made by the company.”

Amid the stalled talks, the union recently filed a complaint against Chanel Korea for violating the OECD Guidelines for Multinational Enterprises -- voluntary and non-binding recommendations aimed at preventing unfair business activities by multinational firms.

In December 2021, the OECD’s Korean National Contact Point also intervened in the conflict between Chanel Korea and its labor union following a complaint about the company’s poor treatment of its cosmetics counter workers.

“South Korea is one of the largest markets for luxury goods. Spending per capita for luxury goods recorded the highest in the world last year,” said Choi Cheol, a consumer science professor at Sookmyung Women’s University, citing the 2022 Morgan Stanley report.

“But if a luxury brand treats its employees unfairly and spends less in the market, conscious consumers may opt to reduce their consumption of the brand,” he said, adding that “The global headquarters’ control over its overseas subsidiaries may be (influencing) companies like Chanel Korea to continue disregarding their (workers') demands.”