An illustration of Gucci's pop-up store that will run in Galleria Department Store's main branch in Seoul from March 1 to 15. Courtesy of Gucci

Chanel abruptly suspended the operation of its boutique on the first floor of Galleria Department Store's main branch in Seoul's affluent neighborhood of Apgujeong-dong, Wednesday, according to industry officials, Thursday. The unprecedented move is seen as a protest against the department store's decision to allow Gucci to run a pop-up store near the French luxury brand's outlet from March 1 to 15.

Hanwha Galleria Vice President Kim Dong-seon / Courtesy of Hanwha Group

Their unusual conflict has raised doubts about whether Hanwha Galleria Vice President Kim Dong-seon, the youngest son of Hanwha Group Chairman Kim Seung-youn, is the right person to lead the conglomerate's retail business.

Chanel's Korean operation attributed its latest decision to Hanwha Galleria — not to Gucci — saying that the Korean firm's measure disrupts its own boutique's visibility and operational environment.

"We express deep regret on Galleria's decision, which is a clear breach of our contract on the boutique environment and also a major compromise to the longtime partnership the two companies shared through the 25-year operation of a permanent boutique," Chanel Korea said in a statement. "We are committed to providing the best possible boutique experience for our clients."

The luxury brand decided to direct customers seeking refunds or change in payment methods to visit the second floor of the department store while asking them to purchase items at its nearby flagship store in Cheongdam-dong. It is considering reopening the boutique once Gucci finishes the pop-up store's operation.

Gucci said it will run its pop-up store until March 15 as planned in accordance with its agreement with the department store.

Hanwha Galleria vowed to continue talks with both brands to minimize the inconvenience.

"We were perplexed as Chanel abruptly stopped the boutique's operation amid negotiations," a Hanwha Galleria official said.

Their ongoing dispute is expected to tarnish the brand image of Galleria, which suffered sales declines at all its five department stores last year under the leadership of the Hanwha chairman's youngest son.

In particular, its main branch focusing on luxury sales posted an annual revenue of 1.1 trillion won ($824 million), a year-on-year decline of 7 percent. The result was in stark contrast to the record-high sales shown at the main branches of Shinsegae, Lotte and Hyundai department stores.

The 34-year-old heir of Hanwha is also facing questions as Five Guys restaurants are opening in Hyundai's Yeouido branch and Shinsegae's Gangnam branch instead of Galleria's, despite Hanwha Galleria's license to run the U.S. hamburger chain in Korea.

Speculation remains that the Hanwha Galleria vice president may focus more on new businesses, such as robotics, due to the skeptical outlook for the department stores.

He was also appointed earlier this year as the vice president to lead Hanwha's overseas construction projects, including the Bismayah New City project in Iraq, which resumed recently as the Iraqi government decided last year to pay the overdue construction costs to the Korean firm.