'Labor Costs Up, Profitability Down'... Gwangju Retail Distribution Business Sentiment Remains Sluggish

Below 100 for 10 Consecutive Quarters
Situation Worsens for Convenience Stores and Supermarkets
"Calls for Large-Scale Promotions and Countermeasures"

This year, retail and distribution businesses in Gwangju are expected to continue facing an economic downturn due to worsening profitability caused by rising costs such as labor and logistics expenses.

According to the Gwangju Chamber of Commerce and Industry on the 14th, a survey conducted in December last year on 47 retail and distribution companies in Gwangju for the "2025 Q1 Retail Business Survey Index (RBSI)" showed the index remained at 85, the same as the previous quarter (85).

This result indicates that despite expectations for economic recovery due to the winter vacation, holiday season, and a trend of interest rate cuts, the index failed to recover to the baseline (100) for the 10th consecutive quarter because of deepening private consumption stagnation caused by internal and external uncertainties and high inflation.

The Retail Business Survey Index quantifies the business sentiment of distribution companies. If the index exceeds 100, it means more companies expect the next quarter's business conditions to improve compared to this quarter. If it falls below 100, the opposite is true.

The most commonly cited difficulty expected in business activities this quarter was "increased cost burdens" (63.8%), including labor, finance, logistics, and electricity. Other concerns included "worsening profitability" (10.6%), "rising import prices due to exchange rate increases" (8.5%), "intensified market competition" (8.5%), "distribution regulations" (4.3%), and "uncertainty over US government policies" (4.3%).

By business type, large supermarkets and department stores are expected to perform similarly to the previous quarter, while convenience stores and supermarkets are expected to see further deterioration in business conditions.

Large supermarkets (100) did not exceed the baseline (100) despite expectations for increased demand during the holiday season, due to the continued downturn in the sector and the shift of food demand to other channels such as e-commerce. Department stores (100) are also expected to maintain the previous quarter's level, as business sentiment is not expected to recover significantly due to slowing growth in luxury demand and the expansion of online demand for fashion goods.

Convenience stores (76), despite increased demand for nearby and small-quantity purchases, are expected to continue facing a downturn due to prolonged consumption stagnation and intensified competition. Supermarkets (73) are also expected to remain in a downturn due to the spread of frugal consumption caused by high inflation and slowing growth in the sector.

Regarding factors expected to affect the domestic consumer market this year, "delayed recovery in consumer sentiment" (72.3%) was cited most frequently. Other concerns included "increased cost burdens" (53.2%) such as labor, finance, logistics, and electricity, "uncertainty over Trump administration policies" (23.4%), "rising import prices due to exchange rate increases" (19.1%), "intensified market competition" (17.0%), and "expansion of Chinese e-commerce influence in the domestic market" (8.5%).

Regarding the impact of domestic martial law and impeachment proceedings on the domestic distribution market, the largest number of companies responded that it would "have a negative impact" (57.1%), followed by "positive" (22.9%) and "no impact" (20.0%).

A representative from the Gwangju Chamber of Commerce and Industry stated, "As domestic demand remains sluggish and profitability continues to worsen, the deepening economic uncertainty is further aggravating the difficulties faced by local retail and distribution companies. Government-level measures, such as large-scale promotions to improve subdued consumer sentiment, and their immediate implementation, appear to be necessary."