Fast Payments to Partners... Large Corporations' 'Chuseok Win-Win'

[Asia Economy Reporter Kim Hyewon] Major conglomerates such as Samsung, SK, LS, Lotte, and CJ Group have taken steps to advance payment of delivery fees to partner companies facing liquidity shortages ahead of Chuseok.

This is a win-win cooperation between large corporations and small and medium-sized partner companies that takes place without fail every holiday season, and especially this year, it has become a timely relief amid the management difficulties caused by the novel coronavirus infection (COVID-19).

Samsung Opens the Floodgates with 1.1 Trillion Won, Relay of Large Corporations' Participation

According to the industry on the 19th, Samsung Group decided to advance the payment of goods worth 1.1 trillion won before the Chuseok holiday to alleviate the financial difficulties of its partner companies.

Ten affiliates including Samsung Electronics, Samsung Display, Samsung Electro-Mechanics, Samsung SDI, Samsung SDS, Samsung Biologics, Samsung C&T, Samsung Engineering, Cheil Worldwide, and Samsung Welstory participated. Each company will advance the payment by 6 to 7 days compared to the original payment date.

In particular, Samsung Electronics and Samsung Display have been paying goods fees in cash four times a month since 2011 to ensure smooth fund management for partner companies. Samsung Electro-Mechanics, Samsung SDI, Samsung SDS, and Cheil Worldwide pay 3 to 8 times a month.

Samsung Group also opened an online marketplace for employees to revitalize the domestic economy, which was hit hard by COVID-19, in celebration of Chuseok. From the 9th of last month until mid-next month, about 200,000 employees from 19 affiliates are targeted to sell specialty products from sister villages and others. Last Chuseok and this Lunar New Year, direct transaction markets involving sister villages of each affiliate were opened to support sales, but this year, to participate in social distancing to prevent the spread of COVID-19, an online marketplace was prepared. The operation period of the market was also extended more than twice from the usual 1-2 weeks to 4 weeks.

This online marketplace also featured products from 27 small and medium-sized enterprises participating in Samsung Electronics' 'Smart Factory Support Project,' adding significance. In addition to agricultural and marine products from sister villages, customers can purchase fish cakes, dried pollack, tofu snacks, and more produced in smart factories, broadening the range of choices.

SK Hynix advanced the payment date for transactions with small and medium-sized partner companies before Chuseok. The payment amount during this period is about 150 billion won.

Additionally, it is selling sets of agricultural and specialty products and daily necessities from the Icheon and Cheongju regions online to all employees. The offline market was also converted to online to prevent the spread of COVID-19.

In April, SK Hynix also strengthened its win-win program by increasing the payment frequency from three to four times a month for small and medium-sized partner companies struggling due to COVID-19.

LS ELECTRIC plans to advance the payment of about 40 billion won in delivery fees to ease the financial burden of partner companies ahead of Chuseok. The settlement scheduled for the 25th will be paid three days earlier on the 22nd.

Since 2014, LS ELECTRIC has been advancing funds ahead of holidays such as Lunar New Year and Chuseok and paying the full amount in cash for payments under 100 million won.

In particular, recognizing partner companies as a second workplace, LS ELECTRIC introduced the industry's first win-win payment system in 2013 to stabilize partner companies' management by improving payment collection rates.

In addition, Hyundai Motor and LG Group, which have advanced over 1 trillion won in partner company payments every holiday season, are expected to announce good news next week.

The Federation of Korean Industries sent a letter to member companies on the 14th under the name of Chairman Huh Chang-soo, requesting participation in win-win activities ahead of Chuseok amid the COVID-19 spread. It urged cooperation with partner companies through early payment of delivery fees and win-win with rural areas by sending Chuseok gifts made from domestic agricultural products.

Chairman Huh delivered a message of consolation and encouragement to companies and their members going through a difficult time, emphasizing that despite the COVID-19 resurgence, heavy rains, and typhoons deepening the worries of the public and farmers, Korean companies should fulfill their roles.

Large Distribution Companies Also Join by Advancing Payments Worth Several Hundred Billion Won

Large distributors such as Lotte, Hyundai Department Store, CJ, and Shinsegae Group actively joined the early payment movement for partner companies. This is to help partner companies suffering from the double hardship of COVID-19 spread and consecutive typhoon damage manage their funds.

Lotte Group, with 35 companies including department stores, e-commerce, and information and communication, decided to advance payment of 600 billion won in delivery fees to about 13,000 small and medium-sized partner companies. The payment date was advanced by an average of 12 days.

Hyundai Department Store Group is advancing payment of 522.5 billion won in delivery fees to about 10,800 small and medium-sized partner companies by 5 to 20 days. About 10,000 small and medium-sized partner companies trading with six affiliates including Hyundai Department Store, Hyundai Home Shopping, Hyundai Green Food, Handsome, Hyundai Livart, and Hyundai Department Store Duty Free will receive 386.6 billion won five days earlier on the 25th instead of the usual payment date (the 30th of each month). Earlier, on the 10th, Hyundai Department Store and Hyundai Department Store Duty Free advanced payment of 135.9 billion won to about 800 small and medium-sized partner companies.

CJ Group said it would advance payment of 370 billion won to partner companies such as CJ CheilJedang and CJ Logistics, and Shinsegae Group said it would advance payment of 190 billion won in delivery fees to about 2,000 partner companies including Emart, Shinsegae, and Emart Everyday.