Consumer

Nisha Gopalan is a Bloomberg Gadfly columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.

China's bite might hurt, but not for long.

That's worth remembering as Beijing rattles the cage of South Korean companies dependent on sales to Chinese consumers. Lotte Group and other retailers such as cosmetics firm Amorepacific Corp. need only look at recent history for examples of their neighbor's short fuse.

Upset at Seoul's planned deployment of a U.S. missile defense system, China is making life difficult for Korean retailers both at home and on the mainland. According to the state-run Korea Tourism Organization, travel agents in China have been ordered to stop selling tour packages to South Korea from this month.

Given that visitors from China accounted for almost half the tourists to South Korea last year, that's no small matter. Some 55 percent of Korea's duty-free sales in 2015, for example, were to Chinese consumers, according to Deutsche Bank AG.

Shopping Paradise
South Korea was the fourth most popular destination for mainland Chinese tourists last year, attracting some 8.1 million visitors
Source: China Outbound Tourism Research Institute, Bloomberg Intelligence

Add an anti-Korea media blitz, including the pulling by major internet-streaming sites of popular TV dramas that champion Korean products, and it's little wonder retailers are worried.

Lotte Group, already struggling with a family feud that led it to scrap a float of its hotel unit, has been hit directly. Chinese authorities suspended the operations of 23 Lotte Mart stores because of alleged fire-safety rule violations, according to Yonhap News, and some websites have stopped selling its products in China.

Lotte Group isn't listed, but investors have punished its publicly traded hypermarket-to-convenience store outfit Lotte Shopping Co., as well as Lotte Confectionery Co. Both firms make less than 5 percent of their sales on the mainland, Bloomberg-compiled data show.

Lotte Pain
Lotte Group company shares have underperformed the broader market
Source: Bloomberg

Lotte isn't alone. China has reportedly ordered the destruction of 700 kilograms (1,650 pounds) of Amorepacific's imported products on the grounds they contained bacteria.

Such an assault may rekindle memories for other brands that have been caught up in Beijing's nationalist sentiments. Remember when McDonald's Corp. blamed protests related to events in the South China Sea for hurting sales?

Lost Gloss
Almost 25 percent of Amorepacific's sales came from China in the fourth quarter
Source: Bloomberg Intelligence

Yet, as Japan's automakers can attest, these attacks don't last. No matter how much firms may be hurting now, Chinese fans of K-Pop aren't gone for good. Companies like Amorepacific are also known for their cheaper prices and faster product turnaround, which makes it easier for them to gain a following among fickle Shanghai fashionistas. Tourists from other countries in Asia could pick up any temporary slack, too.

If anything, the won's strength against the yuan, up 4.7 percent this year, will have a more significant impact on Chinese consumers' love for all things Korean. Beijing's ire can be fierce, but it's also often fleeting.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Nisha Gopalan in Hong Kong at ngopalan3@bloomberg.net

To contact the editor responsible for this story:
Katrina Nicholas at knicholas2@bloomberg.net