Q4 Economic Outlook Index Falls Below 99 Benchmark
Only Online Shopping Shows Strength
[Asia Economy Reporter Lim Chun-han] The retail industry, which had been showing clear signs of recovery, is expected to enter a recession again in the fourth quarter as social distancing measures continue to be strengthened.
On the 5th, the Korea Chamber of Commerce and Industry announced that the "2021 4th Quarter Retail Industry Business Outlook Index," surveyed from 1,000 retail companies, was recorded at 99. An index above 100 means that more companies view the next quarter's business outlook more positively than the previous quarter, while below 100 means the opposite. The retail industry business outlook index exceeded the baseline in the 2nd quarter (103) and 3rd quarter (106) of this year, showing signs of recovery, but the outlook for the 4th quarter fell below the baseline due to an increase in COVID-19 confirmed cases.
Offline sectors showed reduced expectations for sales growth, but non-face-to-face online distribution channels are expected to maintain their strength. By sector, only online shopping (110) exceeded the baseline, while department stores (98), large discount stores (85), convenience stores (88), and supermarkets (98) all fell below the baseline. In particular, large discount stores recorded the lowest outlook, dropping 13 points compared to the previous quarter. The strengthening of social distancing measures has reduced customer visits to large discount stores, and intensified competition with online companies is a major factor.
The sales growth rate of retail companies also slowed to single digits. According to the Ministry of Trade, Industry and Energy, major retail companies' sales in August increased by 2.5% offline and 11.1% online compared to the same period last year. Total sales combining online and offline rose 6.4% to 12.6 trillion won. Previously, the overall retail sales growth rates were 10.0% in February, 18.5% in March, 13.7% in April, 12.9% in May, 11.4% in June, and 13.1% in July, marking six consecutive months of double-digit growth.
Looking at offline sales by sector, department stores (13.0%) and convenience stores (4.5%) increased, while large discount stores and corporate supermarkets (SSM) decreased by 5.5% and 5.3%, respectively. Sales per store increased only in department stores by 9.2%, while large discount stores decreased by 5.5%, convenience stores by 1.8%, and SSM by 1.1%. Online retail companies such as eBay Korea, 11st, Interpark, and Coupang saw continued sales growth in food and service product categories as online grocery shopping, including food delivery and dawn delivery, became widespread.
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