Korean consumers embrace off-price stores as prices rise

Off-Works store [Courtesy of Hyundai Department Store]

South Korean consumers grappling with soaring inflation are turning to off-price stores, finding relief from the burden of high prices even at outlet stores. Off-price stores involve the direct purchase of overstocked items from renowned brands by retailers, allowing them to be sold at prices that are even lower than those at outlets. While outlets typically offer discounts of up to 50 percent, off-price stores provide discounts of up to 80 percent, making them an attractive alternative for budget-conscious shoppers. The clash between Korean and international retail giants is expected to propel the expansion of this market in the country even further.

According to sources on Monday, Hyundai Department Store plans to open its fifth Off-Works store at Hyundai Premium Outlet Daejeon in March 2024. Since inaugurating its first Off-Works store at Hyundai City Outlet Dongdaemun in 2019, Hyundai Department Store has consistently expanded its presence, recording a 2.5-fold increase in sales in 2023 compared to 2020. With eight outlets nationwide, Hyundai Department Store aims to increase the number of these stores even further.

Off-price stores elevate discounts by directly purchasing overstocked items from well-known brands. While conventional outlets typically offer discounts ranging from 30 to 50 percent off the initial sale price, off-price stores provide discounts ranging from 40 to 80 percent. Even for new items, purchasing from off-price stores can be 15 to 25 percent more affordable. Operating with a portfolio of over 100 brands, including “new luxury” French brands AMI and Maison Kitsuné, alongside Eero, Max Mara, and Kenzo, Hyundai Department Store emphasizes that Off-Works plays a crucial role in attracting new customers, constituting 30 to 40 percent of overall buyers, acting as an ‘anchor tenant’ drawing customers to outlet locations.

Shinsegae Department Store is also expanding its presence in off-price stores, recently opening the 16th branch of ‘Factory Store’ in Starfield Suwon. Spanning 846 square meters on the 5th floor of the brand-new shopping mall, Factory Store stocks around 160 Korean and international fashion and lifestyle brands. Catering to the preferences of the 20s and 30s age group, it offers streetwear bands such as Stüssy, Carhartt, and Champion alongside international fashion brands including Thom Browne, A.P.C., and AMI. The maximum discount offered is 80 percent off the initial sale price.

Shinsegae Department Store entered the off-price business two years earlier than Hyundai Department Store, venturing into the market in 2017 with the opening of the first Factory Store in Starfield Goyang. Expanding its national footprint via Shinsegae Department Stores, Shinsegae Simon Premium Outlets, and Starfield, sales doubled from 40 billion won in 2020 to 80 billion won in 2023.

The trend of retail giants focusing on off-price stores is attributed to the sluggish growth in the industry, with combined sales of the top five department stores in Korea increasing by a modest 1.7 percent in 2023 compared to the previous year, while outlet stores sales at the top three retailers grew by only 3.8 percent during the same period.

In contrast, off-price stores like Shinsegae Factory Store reported a growth of over 14 percent during the same period, as the appeal of affordable prices and a diverse range of brands under one roof appeals to customers.