Korean consumers get cynical

Korean consumers are becoming cynical about store pricing as they are increasingly exposed to cheaper international online marketplaces and have experienced months of sales and promotions by bricks-and-mortar outlets.

K-Sale Day, Korea’s Black Friday, Korea Grand Sale are just some of the events that have taken place recently as retailers and government seek to boost consumer spending. This slumped in the wake of an outbreak of Middle East Respiratory Syndrome in late May when people avoided crowded places in an attempt to avoid infection.

One consequence of that was that more consumers went online for not only essentials like groceries, but also for big ticket items and discovered that these could often be acquired relatively cheaply and with a straightforward delivery process, Inside Retail Asia reported.

“As more consumers learn they can easily buy products at a much cheaper price via online vendors, offline shops are more frequently conducting discount events to retain their customers,” according to Jun Mi-young, a professor at Seoul National University.

“The experience of buying foreign brands at discounted prices has created a healthy dose of cynicism about department stores’ pricing policy,” he added.

Inside Retail Asia highlighted one example – the price of a kitchen knife set slashed by almost 60% in a sale but still more than the price charged by several online shopping malls on any given day.

And as bricks-and-mortar sales start earlier and last longer, it noted, “they become less important and easier for consumers to ignore”.

That said, the retail discount events have had some short-term impact, as government data shows that the 22 retailers that joined its own Black Friday Korea campaign saw their sales rise 20.7% year-on-year to 719.4bn Won (US$634.9m) during the two-weeks of the event.

But “squeezing margins is not a sustainable business model”, Jun pointed out.

“As the rise of digital shopping has become an inevitable trend in the retail industry, offline sales channels should seek ways to provide better in-store experiences and quality service,” he said. Data sourced from Inside Retail Asia; additional content by Warc staff