Retail group Shinsegae has decided to pull its chain of discount supermarkets from China, according to the group’s vice chairman Wednesday.

At a job fair held by Shinsegae Group at Kintex in Goyang, Gyeonggi Province, Shinsegae Group Vice Chairman Chung Yong-jin told reporters that Shinsegae’s E-mart chain will be exiting the Chinese market.

This was the first time that a Shinsgae official confirmed industry rumors that the chain would close down its Chinese operations. 

Although a Shinsegae spokesman said the decision was based on “a variety of factors,” market watchers say that the move was fueled by stagnant sales and continuing anti-Korean sentiment among Chinese consumers, following the intergovernmental row over the installment of an American anti-missile system in Korea.

The backlash from Chinese consumers had hit Korean chains in China hard, with E-mart’s rival Lotte Mart seeing widespread boycotts and impromptu safety inspections that led the chain to temporarily close 90 percent of its stores there. Lotte Mart is also rumored to be seeking buyers for some of its local branches, although Lotte has denied any plans to reduce its presence in China.

According to a spokesman for Shinsegae, the E-mart stores will be closed at the earliest possible date, depending on local contract conditions for each store.

E-mart was the first Korean supermarket brand to enter the Chinese market in 1997. Despite aggressive investments in the business, the chain failed to gain traction and underwent massive restructuring. At the end of 2010, the chain had 26 stores. It currently operates just six.

The chain’s losses in China over the past three years totaled over 100 billion won ($89.2 million). 

By Won Ho-jung (hjwon@heraldcorp.com)