Optimism looms over recovery in domestic spending on easing inflation

Emart Yeonsu [Courtesy of Shinsegae Group]

Domestic spending in South Korea is projected to rebound this year on the back of easing prices and anticipation for lower interest rates.

According to local financial data tracker FnGuide Inc. on Monday, the combined operating profit of the country’s three major retailers – Lotte Shopping Co., Shinsegae Inc., and Hyundai Department Store Co. – is estimated at 1.67 trillion won in 2024, up 19 percent from a year ago.

Lotte Shopping, the largest among the three retailers, is projected to post an operating profit of 589.3 billion won this year, up 24 percent from the previous year.

The strong sales of Korean retailers reflect optimism over improved domestic spending.

According to data released by the Ministry of Trade, Industry, and Energy in December, sales of 25 major retail entities amounted to 16 trillion won in November, up 8.7 percent from a year ago.

Sales growth was witnessed across all business sectors.

Department store sales jumped 6.8 percent in November from the same period a year ago, convenience store sales 4.2 percent, and big-box store sales 1.3 percent.

By product, sales of fashion and accessories increased 6.4 percent, children and sports items 14 percent, and household goods 6.5 percent.

Consumer sentiment among the middle-income households is expected to improve once high-interest rates and inflation subside.

Some observers note, however, that even if the economy rebounds, it may not be easy for positive sentiment to spread across the entire domestic market due to deepening structural polarization in consumer behavior.

“The fierce competition between online and offline innovations is intensifying, and the trend of direct overseas purchases is also expanding, leading to diverged performance within the retail industry,” said one industry insider.