[Asia Economy Reporters Yuri Kim and Chunhan Lim] As social distancing measures are strengthened nationwide and about 88% of the population receive the ‘Coexistence National Support Fund’ of 250,000 KRW per person with designated usage locations, the retail industry is experiencing mixed fortunes.
◆4th Week of Level 4 Social Distancing... Department Store and Large Mart Sales Decline
According to the distribution industry on the 3rd, since the social distancing in the metropolitan area was raised to Level 4 on the 12th of last month, sales of major department stores and large marts have either decreased or shown reduced growth compared to the same period last year during the three weeks up to the 1st of this month (excluding store holidays).
Lotte Department Store’s sales during this period fell by 3% compared to the same period last year. The previously strong growth in overseas luxury brands slightly weakened, and the fashion sector recorded a sales decline in the 5% range. During the same period, Shinsegae Department Store and Hyundai Department Store also saw single-digit sales growth rates. The fashion sector, which had been recovering due to revenge consumption this spring, struggled, with Shinsegae Department Store’s women’s and men’s fashion sales dropping by 9.8% and 4.9%, respectively, and Hyundai Department Store barely growing by 0.8%. Due to concerns over the spread of COVID-19, food sales also decreased by more than 8% during this period. A department store official said, "Although seasonal home appliances are showing double-digit growth compared to last year due to the heatwave, the number of in-store customers has significantly decreased due to social distancing, resulting in negative growth rates in fashion and food."
Large marts are also experiencing sluggish sales during the peak vacation season when they should be capitalizing on high demand. Homeplus’s sales have fallen by about 5% compared to the same period last year during the three weeks following the strengthening of social distancing. Emart’s growth rate is also limited to around 0.5 to 1%.
◆Excluded from Support Fund Usage Locations... Concerns Over Sharp Sales Decline
Large marts are concerned that once the National Support Fund usage begins, demand will shift to alternative channels where the fund can be used, making it impossible to avoid a sharp drop in sales. Last year, when the disaster relief fund usage started in May, large mart sales plummeted by 9.7% compared to the same month the previous year. A large mart official said, "After the disaster relief fund was distributed last year, meat consumption such as Korean beef increased significantly, but marts excluded from the fund usage locations saw a sharp decline in livestock sales. It seems difficult to avoid similar problems this year."
In response, large marts and department stores have started preparing countermeasures such as pre-order sales for Chuseok gift sets. They are offering discount benefits for pre-orders and providing gift certificates based on purchase amounts during certain periods to attract customers and minimize the impact of the National Support Fund.
◆Convenience Stores Growing Rapidly... Preparing for Support Fund Boom
On the other hand, convenience stores are expecting a boom from the National Support Fund. According to the Korea Development Institute, last year’s first emergency disaster relief fund usage was 11.9% at (small and medium-sized) marts and supermarkets, followed by 5.6% at convenience stores. Accordingly, convenience stores are proactively conducting large-scale discount events. They aim to capitalize on the increasing demand for convenience store shopping following the strengthening of social distancing.
GS25 is holding a living cost stabilization event this month, selling food and daily necessities at the lowest prices nationwide. They selected 100 living cost stabilization items mainly consisting of consumer-preferred agricultural, livestock, and marine products, ice cream, ready-to-eat foods, ramen, bread, beverages, tissue, and detergent, offering promotions such as buy 1 get 1 free, buy 2 get 1 free, and special discounts. Emart24 is also conducting buy 1 get 1 free and buy 2 get 1 free promotions on 137 types of convenience foods, 160 types of processed foods, and about 300 daily necessities throughout the month. The scale has increased by about 30% compared to last year. A convenience store industry official said, "We expect the recently emerging trend of convenience store shopping to increase further," adding, "We are considering additional events timed with the distribution of the Coexistence National Support Fund."
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