7 Years After Opening in 2013
Dongdaemun Commercial District Decline and COVID-19 Recession
Clothing Brands Exit One After Another
"Contract Period Remaining... Considering Direction"
[Asia Economy Reporter Cha Min-young] Lotte Asset Development will close 'Lotte Fitin Dongdaemun Branch,' which has been operating for over seven years, on the 31st of this month. Once a key tourist spot with foreign sales exceeding 50%, the business difficulties worsened due to the decline of the Dongdaemun commercial district combined with the COVID-19 pandemic.
A Lotte Asset Development official said on the 28th, "Due to the impact of COVID-19 and the departure of most clothing brands, operational efficiency could not be achieved, so we decided it was better to close. There is still time left until the contract expires, and we are considering future operational directions."
Lotte Fitin Dongdaemun Branch is a community-friendly fashion mall introduced in Dongdaemun in May 2013 after Lotte Group signed a long-term lease contract with the existing building management group. It capitalized on the characteristics of Dongdaemun, where foreign tourists gather, establishing itself as a space to experience Korean Wave culture. Chinese tourists accounted for about 80% of foreign visitors, driving sales. Various promotional events were also held to promote Korean fashion, food, and culture in cooperation with local small business owners.
However, visits by Chinese tourists, the main customers, sharply declined from 2015, and with the rise of online shopping domestically, the competitiveness of Dongdaemun as a fashion hub also declined. Projects to revitalize the Dongdaemun commercial district continued but yielded unsatisfactory results. Last year, the first permanent store of 'Within24,' a 24-hour personalized clothing production project supported by Seoul City and the Ministry of Trade, Industry and Energy, opened on the second floor of Fitin, but only about 400 garments were sold from April to December, averaging less than two garments per day.
Especially this year, with the outbreak of COVID-19 completely halting foreign tourist arrivals, many clothing brands and merchants in Dongdaemun shops, burdened by fixed costs such as rent and labor, began to leave. According to regional vacancy rate statistics by the Korea Real Estate Agency, the vacancy rate of medium to large stores in the Dongdaemun commercial district rose by 4.5 percentage points from 7.3% in the fourth quarter of last year to 11.8% in the third quarter of this year. This exceeded both the Seoul area average (8.5%) and the average of major downtown commercial districts (9.7%) during the same period.
Lotte Asset Development, the entrusted operator of the shopping mall, also downsized due to difficulties caused by COVID-19. Existing domestic and international complex shopping mall operations were transferred to Lotte Shopping, asset management services and shared office businesses to Lotte Property & Development, and residential operation businesses to Lotte Construction. Many employees were reassigned to other affiliates.
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