"Tightening Belts Amid High Inflation" Consumers Seeking Value Even at Department Stores

Economic Outlook for the Second Half of the Year Through Chuseok Gifts
Endemic Transition and Inflation Impact
Chuseok Gift Trend is 'Cost-Effectiveness'

High-End Gifts Also Selling Well
Hanwoo 'Number Nine' Approaching 1 Million Won
Reflecting Income Polarization Era

Editor's NoteHoliday gifts are often referred to as a mirror reflecting the times. In difficult times, people shared their affection with a few eggs or a piece of meat, but as income rose with economic development, expensive Korean beef, dried yellow corvina, and whiskey adorned department store shelves. The image of children eagerly awaiting cookie gift sets during past holidays has now become a nostalgic scene as societal views on snacks have changed. What will this year's Chuseok, the first full endemic holiday, be like? Due to the inflation caused by the COVID-19 recovery process, practical gifts are expected to stand out. At the same time, reflecting the current era of income polarization, premium gifts are also anticipated to remain strong.

"What should I choose for this year's Chuseok gifts?"

The great national holiday, Chuseok, is just over a month away. The retail industry poses the reverse question to what everyone has probably wondered at least once: 'What should we sell as Chuseok gifts this year?' The industry invests significant manpower and time to find answers to this question. They analyze consumer trends, measure demand, and assemble products accordingly. The first tangible result is the pre-order sales. Examining the product lineup can serve as a compass for consumers contemplating Chuseok gifts. This year, the compass needle points unmistakably toward 'cost-effectiveness.'

Lotte Department Store will begin pre-order sales for Chuseok gifts starting from the 18th. The photo shows a customer selecting Chuseok gift items at Lotte Department Store.
[Photo by Lotte Department Store]

This Year’s Chuseok Gift Trend: Practical Gifts

According to the industry on the 17th, department stores and large supermarkets will conduct pre-order sales for Chuseok gifts until mid-next month. Large supermarkets such as Lotte Mart, E-Mart, and Homeplus have already started since the 10th, while the three department stores?Lotte, Shinsegae, and Hyundai?will begin on the 18th. Pre-order sales offer the advantage of purchasing at prices lower than the regular price and also serve as a gauge to glimpse the product lineup for the year.

Looking at the pre-order product categories, this year’s Chuseok gift trend is clearly practical gifts. Each company has significantly increased the proportion of practical gift sets priced under 100,000 KRW. Shinsegae Department Store and Lotte Department Store both announced plans to expand the number of products in this price range by 10-15% compared to last year’s Chuseok, and Hyundai Department Store plans to increase the quantity and items of pre-order products with discounts by more than 30% compared to the previous year. These companies commonly explain that they have enhanced accessibility anticipating an increase in consumers seeking cost-effective gift sets.

The practical gift trend is even more pronounced among large supermarkets that started pre-orders earlier. E-Mart is selling 50% more Korean beef products under 100,000 KRW than last year’s 8 items. Among fruit products, the popular 'Signature Shine Muscat 2 bunches (1.5kg)' is available for pre-order at a price under 30,000 KRW (29,400 KRW). Homeplus has increased mid-priced products in the 20,000 to 50,000 KRW range by 20%, and Lotte Mart has expanded fresh food products under 100,000 KRW and processed goods under 50,000 KRW by 10% each.

Consumers’ Wallets Thinner Amid Inflation

The moves by department stores and large supermarkets are interpreted as considering consumers’ circumstances, whose wallets have become thinner due to inflation caused by the COVID-19 recovery process. Professor Sung Tae-yoon of Yonsei University’s Department of Economics said, "Although the recent consumer price inflation rate remains around 2% due to the base effect of last year’s significant price increases, the actual inflation rate after COVID-19 is quite high," adding, "Since people perceive prices to be at a fairly high level, this trend is reflected accordingly."

There is also analysis that the holiday atmosphere has changed again with the transition to endemic. During the COVID-19 period, gifts were emphasized out of regret for not being able to visit hometowns, but this year, with the full endemic phase, the situation is different. Additionally, concerns about a prolonged economic downturn have led consumers to tightly close their wallets, encouraging practical consumption. Professor Lee Eun-hee of Inha University’s Department of Consumer Studies said, "With the endemic, there is likely a psychological tendency to bring cost-effective gifts when visiting hometowns for the holidays," adding, "Luxury consumption has also decreased recently, and it is highly likely that recession-type consumption pursuing cost-effectiveness will continue through the end of this year."

Demand for Ultra-High-End Premium Gifts Remains Strong

Contrary to the practical gift trend, the proportion of ultra-high-end premium gift sets remains steady. For premium livestock products composed of the highest grade Korean beef, Two-Star Number Nine (1++ NO.9), prices remain high, nearing 1 million KRW, even though prices have somewhat dropped due to increased supply this year. Premium gift sets of Jeju cutlassfish or dried yellow corvina also approach 500,000 KRW, which may be burdensome for general consumers.

The reason department stores and large supermarkets continue to offer premium gift sets that deviate from the cost-effective trend is income polarization. While middle- and low-income groups tighten their belts due to high prices and choose cost-effective products, high-income groups are expected to maintain their spending without significant impact. In fact, since the pandemic, the income level of high-income groups has risen sharply, while the income growth rate of low-income groups has lagged. According to Statistics Korea, in the first quarter, the average monthly income of the top 20% income quintile households was 11,483,000 KRW, a 6% increase compared to the same period last year. Disposable income, after taxes and pensions, was 8,869,000 KRW, up 4.7% from a year earlier. In contrast, the lowest quintile had an average monthly income of 1,076,000 KRW and disposable income of 858,000 KRW, increasing only 3.2% and 1.3% respectively compared to the previous year.

Reflecting this reality, department stores are likely to diversify ultra-high-end premium gift sets during the main sales period. Previously, Galleria introduced a limited edition whiskey, 'Platinum Jubilee 70 Years,' priced at 44 million KRW, as an ultra-high-end premium gift set during the Lunar New Year main sales. Additionally, Lotte, Shinsegae, and Hyundai Department Stores have expanded their premium gift set product lines priced over 1 million KRW.