Retail giants should stop squeezing in-house vendors

Department stores, big retail chains and home shopping networks saw their net profits increase sharply compared with the moderate growth of their sales, according to the Fair Trade Commission. The combined sales of the "big three" department stores, including Lotte, and the three biggest discount chains, including E-mart, in 2010 amounted to 31.8 trillion won (US$29.7 billion), 2.7 times their sales 10 years ago. However, their yearly net profits last year were 7.1 times higher, reaching 2.6 trillion won. The sales revenue of five home shopping channels expanded by 1.5 fold during the same period while their net profits skyrocketed 11.2 times. Such big jumps in net profits relative to sales growth is chiefly because of abnormally large growth in the commissions the retail giants charge the vendors who sell products in the department stores and retail chains and via home shopping networks. Vendors pay a contracted percentage of their sales revenue to department stores in the name of commission in return for space in stores and promotional activities aimed at helping to sell their products. The vendors and commodity suppliers most of them small and medium-sized industries have to be low-profile in their dealings with the powerful retailers and endure the tyrannical charging of hefty commissions. They claim some retailers even force them to cover the expenses for various promotional activities.