[New Consumer Generation ] "Fun Comes First, Consumption Follows"

Department Stores Strengthening 'Shopertainment': Why MZ Spend Freely Despite Saving, Growing MZ Purchasing Power, and Expanding New Rich... Accelerating Consumption Polarization

Department stores are undergoing structural reforms tailored to the tastes of the MZ generation (Millennials + Generation Z) because their lifestyles have changed in ways different from the past. 'The Hyundai Seoul' and 'Lotte Department Store Jamsil Branch (Jamsil Lotte World Mall),' which promote themselves as 'MZ department stores,' showcase pop-up stores along major visitor routes. They open pop-ups featuring popular characters, selling dolls, keyrings, and other merchandise made from those characters, and introduce representative products like hand creams from trending new vegan beauty brands. Rather than simply displaying products, they incorporate elements like 'Insaeng Ne Cut' (a popular photo booth) or 'roulette games' to encourage visitor participation. Instead of directly pushing purchases by emphasizing product features or prices, they adopt a strategy called 'shoppertainment,' where visitors feel enjoyment and benefit, leading naturally to purchases.

Visitors are flocking to the popular character 'Janmang Loopy' pop-up store 'Holiday with Janmang Loopy' held at Lotte World Mall in Jamsil, Songpa-gu, Seoul, at the end of last year.
[Photo by Lotte Department Store].

This is regarded as a representative change that properly targets the recently evolved consumption desires of the younger generation. Interest comes first, and consumption follows the fun. The important point is that the purchasing power of the MZ generation, which pursues this kind of consumption style, has generally increased. While they may challenge themselves with a 'week-long no-spending challenge' when necessary, being frugal is not their identity. They open their wallets without hesitation for anything that piques their interest. In the summer season, they try hotel mango shaved ice and purchase bags from fashion brands that frequently sell out on social networking services (SNS), sparking desire to buy. To leverage the changed culture of the younger generation, department stores place character keyrings that attract interest along major routes instead of expensive luxury goods that command high rent.

The emergence of the 'new rich' has also fueled the structural reform of department stores. Young high-net-worth individuals have significantly increased compared to the past by forming assets through various means such as business income from startups, property income from capital investments, and value creation using new media, in addition to typical earned income. Although asset values have declined from their peak due to reduced liquidity triggered by recent interest rate hikes, wealth polarization is intensifying. According to the '2022 Household Financial Welfare Survey' released by Statistics Korea, income inequality between the upper and lower classes worsened last year. While the income of the 1st quintile (lowest 20%) increased slightly, the income of the 5th quintile (highest 20%) rose significantly. As a result, assets in the 1st quintile decreased by nearly 10%, whereas assets in the 5th quintile increased by more than 10%.

Concerns over economic contraction have also led to polarization in consumption. The principle is that for essential goods, consumers carefully consider cost-effectiveness (performance relative to price), but for luxury goods, they prioritize psychological satisfaction, or 'value for the heart,' more in their consumption. Added to this is the purchasing power of the new rich, which helps defend against a decline in consumption. This is why department stores cannot let go of their focus on the MZ generation. Jinhyup Lee, a researcher at Hanwha Investment & Securities, stated, "In 2013, when consumption slowdown occurred due to liquidity reduction following quantitative easing measures to overcome the financial crisis, large discount stores shrank and convenience stores' growth rates significantly slowed, but the department store channel still maintained a growth rate of about 2%. The MZ generation, which has recently emerged as the mainstream of the consumer market, is becoming more sensitive to the value that products provide in consumption," he diagnosed.