Retailers agree to cut sales commission for small vendors

Department stores and other retail giants said Tuesday that they agreed to cut sales commissions imposed on small vendors in line with the government's request for cooperation in achieving "shared growth." The agreement to lower sales commissions by up to 7 percentage points came at a meeting between Fair Trade Commission (FTC) Chairman Kim Dong-soo and the heads of 11 retail giants including department stores and TV home shopping companies in central Seoul. Vendors pay a contracted percentage of their sales revenue to department stores in the name of commission in return for space in stores and promotion activities aimed at helping sell their products. "The CEOs agreed to lower sales commissions by 3-7 percentage points for small and mid-sized vendors starting in October," the FTC said. It added that the ratio adjustment and other details will be determined by individual companies. The retailers who joined the meeting included three leading department store chains -- Lotte, Shinsegae, and Hyundai -- along with other major discount chains and TV home shopping companies. The move came a few days after the FTC asked for local retailers to cut commissions in line with the government's push for shared growth between large companies and smaller enterprises more vulnerable to economic downturns. Vendors have been claiming that large retailers take too much from in-store sales in commissions, putting a drain on their profits and eventually hurting their businesses. Large retailers have been under fire for using their market dominance to raise their profits by forcing price cuts and hikes in sales commissions from smaller vendors. Commissions have been on the rise over the past decades. The nation's three major department store chains imposed an average commission of 29.3 percent of sales last year, up from 25.3 percent in 1991, according to the FTC.