Lotte Department Store in Gangnam, Seoul / Courtesy of Lotte Shopping

By Kim Jae-heun

Lotte Department Store's new CEO Jung Jun-ho is striving to change the authoritarian leadership style that has long been deep-rooted in the company. With his appointment last month, Jung first introduced his "ABCD" policy, an acrostic for "agility," "being proactive," "creative" and "design is everything, everywhere." The new chief asked for quick decision-making and horizontal communication between all employees.

However, the company is struggling to break down its deep-seated, vertically oriented corporate culture.

Jung has been throwing out topics for discussion consistently on the company's intranet, but most employees only compliment his opinions, rather than actually sharing theirs. Jung wants to establish a work culture and environment where people freely share their ideas, but the existing system is not used to it.

Catching on to ongoing trends quickly is imperative in the retail business, and the Lotte Group chairman has given Jung the task of achieving that by overhauling the company's top-down corporate culture.

But Lotte Department Store employees are too accustomed to following the "check-and-confirm" method, in which all details need to be confirmed with various levels of management, even when making minor decisions. This system has dropped Lotte into second place behind Shinsegae in sales since 2016.

For the last five years, Shinsegae's department store in southern Seoul's posh Gangnam District has been reigning with all-time-high records in its business performance. Lotte's department stores in Jamsil and Gangnam are still the second- and third-most-lucrative in Seoul, but their gaps with the No. 1 player are continuing to increase.

Shinsegae Department Store in Gangnam showed 2.03 trillion won in sales in 2020, up by 5.5 percent year-on-year, but Lotte Department Store in the same district couldn't even make 1 trillion won in sales. Lotte's top two branches in downtown Seoul and Jamsil both made 1.47 trillion won in revenue, down by 14.8 percent and 3.3 percent, respectively, compared to the figures from the previous year.

"I will make Lotte Department Store's Gangnam branch the most lucrative. Let's make the store more sophisticated and distinct from Shinsegae in Gangnam, and provide various kinds of content there. We will renovate our stores in Gangnam and Jamsil and improve their reputations," Jung said. The CEO said that once the Gangnam branch becomes successful, he will do the same to other branches around the country.

Jung is also emphasizing the importance of the retailer's grocery sector. Unlike other products that customers have no problem shopping for online, they still want to buy their groceries at physical stores.

The CEO put the food sector directly under his management in order to take care of it.

"This means that Jung will be in charge of the food business on his own. It is because of the growing importance of the fresh food sector in offline retail channels," an industry source said.

Grocery stores are considered a major method for traditional retailers to maintain their customers even while e-commerce firms are expanding their influence.

"Online grocery firms are quickly becoming the most competitive in the market but traditional retailers still hold dominance. They have strength with bigger purchasing power and simpler purchasing processes," the source said.

Shinsegae seems to agree on these points too. Shinsegae Department Store in Gangnam has been offering a subscription service for premium fruit for VIP customers, the membership of which increased by 200 percent in 2020.