Department stores, retailers drive consumption recovery

The Hyundai Seoul’s H-VILLAGE [Courtesy of Hyundai Department Store]

South Korean retailers, including department stores, hypermarkets, and convenience stores, as well as online shopping malls, are making a modest recovery from a weaker-than-expected summer holiday season, raising hopes for a boost in November and the Christmas and New Year shopping seasons. But with prolonged high interest rates likely to contract consumption, retailers are scrambling to keep the spark of recovery alive by offering discounts on daily necessities.

According to Statistics Korea on Wednesday, sales at hypermarkets and duty-free shops dropped from a month ago in July 2023 but turned positive in both August and September. Sales at department stores and supermarkets, which saw negative growth in August, also turned positive or saw a smaller fall in September.

The modest recovery continued in October, with Lotte Department Store, the country’s largest, known to have seen a 5 percent increase in sales in September and October from a year ago. “Sales are increasing mainly for high-value products, including luxury goods,” an official from the department store said.

Sales at a hypermarket, affected by middle class economy, rose about 6 percent in October. “The increase in sales despite the decline in the hypermarket industry in the past two to three years, such as selling off some of its stores, shows that consumer sentiment is recovering,” an official said.

Analysts note this as a positive sign as online shopping malls such as Coupang Inc., hypermarkets’ biggest competitor, saw sales continue to rise in 2023, resulting in a spillover to offline stores.

The retail industry is gearing up for the fourth quarter, which coincides with the year-end and New Year holidays and the peak shopping season, to take advantage of the opportunity to continue the recovery in consumption. As a recovery in exports, particularly in major sectors such as semiconductors, tends to improve domestic consumer sentiment, retailers are set to make concerted efforts to drive actual sales growth. “Sales have not yet recovered to pre Covid-19 pandemic levels,” an industry official said. “It is encouraging to see that sales are continuing to recover, albeit slowly, and that the year-end season is still ahead.”

The resumption of Chinese group tours and an increase in foreign arrivals are also boosting sales in the travel industry.

Lotte Tourism Development Co. announced on Wednesday that Dream Tower Casino, its foreigners-only casino at the Jeju Dream Tower hotel complex, posted net sales of 19.81 billion won ($14.60 million) in October. The casino drop, the amount of money exchanged for chips by casino customers, was a record 143.4 billion. It averaged 26.3 billion won a month prior to the resumption of direct overseas flights between June 2021 and May 2022, but has been on a steep upward curve since reaching 113.7 billion won in May 2023. The number of visitors also topped 30,000 for the first time since the casino’s opening.

The hotel and duty-free industry believe that they have to wait until the first half of 2024 to see a full recovery in sales to pre-pandemic levels. They expect a further increase in foreign tourists as group tours have only just resumed and spring and summer tend to draw more tourists than winter.