Stores agree to lower commissions

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Stores agree to lower commissions

Major department stores agreed to lower their sales commissions for vendors as part of efforts to ease the heavy financial burden of their small business partners, the antitrust watchdog said yesterday.

According to the Fair Trade Commission, the top three department stores — Lotte, Shinsegae and Hyundai — agreed to lower sales commission rates by 3 percent to 7 percent for 1,054 vendors, about half of their total small and midsized suppliers.

That will lower commission rates for those vendors, most of which sell clothes and miscellaneous items, from about 32 percent to 25-29 percent, the watchdog said. The lowered rates will be applied from their October sales.

Vendors pay a contracted percentage of revenue to department stores in commission in return for space in the stores and promotional activities aimed at selling their products.

But many retail giants here have been under fire for charging much higher commissions on smaller vendors than to other luxury brands.

Such high rates are also blamed for causing price hikes and hampering efforts to keep a lid on inflation.

The watchdog has been at the forefront of efforts to crack down on such unfair business practices in the retail sector. This is in line with the government’s push to attain “shared growth” between small and large businesses.

In September, FTC Chairman Kim Dong-soo met with the heads of 11 retail giants and agreed in principle to reduce sales commissions applied to small vendors.

“The rate cut is expected to help those small- and medium-sized companies that sell their products at department stores,” the FTC said. “We will keep tabs on whether the rate reduction is actually being enforced.”

The watchdog noted that it is asking for other retail giants, including TV home shopping operators, to lower commissions for small vendors. The work will be completed by the end of this month, it added.


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