[비즈한국] The appointment of Executive Director Kim Dong-ha, formerly of Lotte Holdings, as the new CEO of Lotte Duty Free—which has already declared a state of emergency management—has caused unease within the company. With Lotte Duty Free having already reduced its headcount through a round of restructuring in August, anxiety is spreading among employees that further workforce adjustments may be on the horizon under the new leadership.
Expectations of Reappointment Dashed, New CEO Takes Office Amid Rising Employee Anxiety
On November 28, Lotte Group announced its regular executive appointments for 2025. Amid widespread talk of a "Lotte crisis," the largest-scale executive reshuffle since the company's founding was carried out. 36% of group CEO positions were replaced, and 22% of all executives retired.
The "cold winds" also blew through Hotel Lotte. All three business division heads (Lotte Hotel, Duty Free, and World) were replaced. Jung Ho-seok, an Executive Vice President from Lotte Holdings, was named representative of Hotel Lotte and the Hotel division, while Kwon Oh-sang, an internal veteran, was appointed to lead the World division. For the Duty Free division, Kim Dong-ha, an Executive Director from Lotte Holdings, was promoted to Senior Managing Director and named its new head.
Particular attention is focused on the future path of CEO Kim Dong-ha, who is now in charge of the duty-free division. Kim previously served as the Team Leader of Corporate Culture at the Lotte Holdings HR Innovation Office, where he oversaw group labor relations and productivity management. As Lotte Duty Free is operating under an emergency management system, there is growing expectation that full-scale restructuring efforts will begin following his inauguration.
CEO Kim was officially appointed to Lotte Duty Free over the weekend on the 1st and reported for his first day of work on the 2nd. A Lotte Duty Free official stated, "We understand that after his first day, he received reports from the Planning Division. We expect that procedures such as organizational restructuring will take place sequentially within this month."
Lotte Duty Free, which has been suffering from continued poor performance, entered an emergency management system in June. The company cut executive salaries and began restructuring. In August, approximately 150 employees left the company through a voluntary retirement program. This figure accounts for 17% of the total full-time staff (910 as of the end of 2023) of Hotel Lotte's duty-free division.
With internal morale already dampened following the restructuring, the change in leadership has further heightened employee anxiety. One employee noted, "With the reduction in staff due to voluntary retirement, we are facing difficulties in store operations. We hear complaints that it is overwhelming to work with such a small team," adding, "In some stores, there are so few staff members that they have to leave the store empty during lunch hours to go eat." They continued, "There is talk internally that further restructuring will happen. Since the new CEO was in charge of HR at the holding company level, I believe he will play a role in further trimming down the duty-free business."
Another employee expressed concern, stating, "I understand that the number of voluntary retirees last time was close to the company's target. Because of that, many internally thought the previous CEO would be reappointed, but seeing the unexpected replacement, I think the restructuring could proceed with even higher intensity."
Lotte Duty Free explained that nothing has been decided regarding additional restructuring. A company official stated, "As of now, there are no plans for further personnel adjustments. We have already reduced our retail floor space by approximately 35%, and there are no discussions regarding further reductions in downtown duty-free stores."
Shrinking Overseas Operations and Abandoned New Openings; Focus Remains on 'Efficiency' Next Year
Lotte Duty Free is expected to continue its business restructuring next year. Recently, Lotte Duty Free announced the closure of its duty-free showroom, 'Now In Myeongdong,' in Myeong-dong, Seoul. Now In Myeongdong is a showroom that Lotte Duty Free launched in October of last year. It has been operated under a lease by Lotte Duty Free, covering three floors with an area of 297 square meters (about 90 pyeong). The showroom will shut down after operating through the 10th of this month.
A Lotte Duty Free official explained, "The closure of Now In Myeongdong was already scheduled under the previous CEO. It was designed to promote visits to our duty-free stores, but with the decrease in group tourists and the poor economy, the average transaction value has dropped, leading to the decision to close it."
There are also predictions that the scale of overseas operations will be reduced. During an Investor Relations (IR) meeting held on November 28, Lotte Group announced plans to improve its overall financial structure and mentioned the possibility of withdrawing from underperforming overseas duty-free shops. Currently, Lotte Duty Free operates 13 overseas stores in six countries, including Japan, Vietnam, Australia, and New Zealand. Lotte Duty Free previously exited its Taiwan, Thailand, and Indonesia operations in 2020 due to poor performance.
A Lotte Duty Free official stated, "(Plans for closing overseas sites) have not been confirmed yet. However, as the company is a target for restructuring, the possibility is being mentioned as there are plans to clear out underperforming overseas branches."
Among Lotte Duty Free employees, rumors are circulating that the company had been reviewing the opening of new overseas locations, but that those plans were scrapped following the new CEO's appointment. One employee hinted, "A task force team was formed about two months ago to review a new opening in Hawaii. There were concerns about whether a store in Hawaii would succeed, but given the atmosphere of shrinking overseas operations, wouldn't a new opening be difficult?" Regarding this, Lotte Duty Free explained, "We have a policy to review suitable locations for overseas business, but we are not currently considering a store opening in Hawaii."
The industry predicts that the duty-free sector's slump will be prolonged. An industry official stated, "Even foreign tourists no longer prefer duty-free shopping as much as they used to. Domestic customers mainly purchase sale items through online duty-free shops," adding, "The duty-free industry's profit structure is continuously deteriorating, so expectations for performance improvement are low."
Lotte Duty Free stated, "The current market conditions are poor, and it is difficult to find a clear breakthrough immediately. We expect to continue focusing on management efficiency next year," adding, "Even during the restructuring process, we are taking measures to ensure that customer service on the front lines is not compromised."