1400 Store Sales Employees to Be Directly Hired
Most Are Existing Promotional Staff
"Employment to Strengthen Competitiveness of Home Appliance Retailers"
Lotte Hi-Mart will directly employ 1,400 store sales staff and deploy them to nationwide stores starting from the 1st of next month. This is a follow-up measure after Lotte Hi-Mart received a corrective order from the Fair Trade Commission for violating the Large-scale Distribution Business Act by having dispatched employees from suppliers such as Samsung Electronics and LG Electronics sell competitor products.
According to the industry on the 17th, Lotte Hi-Mart will end the dispatched work of existing Samsung Electronics and LG Electronics brand promotion staff as of the 30th of this month. To this end, they have been conducting an open recruitment process for store sales positions since early last month. About 90% of the newly hired employees are reportedly former promotion staff who worked at Lotte Hi-Mart, with some new recruits included.
Previously, in December 2020, Lotte Hi-Mart was found to have had approximately 14,500 dispatched supplier employees sell competitor products worth 5.5893 trillion KRW (from January 2015 to June 2018), resulting in a corrective order and a fine of 1 billion KRW from the Fair Trade Commission for violating the Large-scale Distribution Business Act. The total sales amount of 5.5893 trillion KRW accounted for 50.7% of Lotte Hi-Mart's total sales during that period.
In February of the following year, Lotte Hi-Mart filed a lawsuit challenging the Fair Trade Commission's corrective order. Lotte Hi-Mart argued that due to the nature of the home appliance retail business, it was inevitable for dispatched employees to introduce and sell products from multiple companies simultaneously. However, the Seoul High Court, which heard the case, ruled in favor of the Fair Trade Commission in July. It found that Lotte Hi-Mart violated the obligation under the Large-scale Distribution Business Act prohibiting the use of supplier employees. Lotte Hi-Mart appealed this decision, but the Supreme Court finalized the ruling by dismissing the appeal without trial in November last year.
Following the Fair Trade Commission's sanctions and court rulings, Lotte Hi-Mart changed its store sales operations. It prohibited instructing dispatched supplier employees to sell competitor products, so-called cross-selling, and strengthened regulations to refer store managers who violate this to the personnel committee. It is reported that education on the prohibition of cross-selling is conducted several times annually.
After these measures, Lotte Hi-Mart judged that a fundamental change was necessary to comply with government guidelines on promotion staff operation and decided to convert to directly employing a large number of sales staff. A Lotte Hi-Mart official stated, "By operating store sales staff mainly as direct employees, we have enhanced the employment stability of these employees," and added that employees with diverse experience and know-how will be utilized as important human resources to strengthen the core competitiveness of home appliance retail stores."
Home appliance retail stores have faced difficulties since the COVID-19 pandemic due to economic recession and e-commerce competition. In 2022, Lotte Hi-Mart conducted voluntary retirement to overcome continued poor performance amid worsening market conditions. Since last year, Lotte Hi-Mart has undertaken company-wide sales structure improvements, implementing strategies such as store renovations, advanced appliance care services, strengthening private brands (PB), and enhancing online shopping malls, ultimately succeeding in turning annual operating profit (8.2 billion KRW) positive. In the first quarter of this year, it recorded an operating loss of 16.038 billion KRW, reducing the loss by 37.9% compared to the same period last year.
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