Sales growth disappoints South Korean department store operators
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A South Korean government-led retail sale festival designed to boost spending amid the coronavirus outbreak ended yesterday, with major department stores posting an increase in revenue on high demand for luxury goods.
But discount store chains and traditional markets did not see sales rise as much as expected, due mainly to the compulsory closure of outlets and lack of promotion strategy.
South Korea kicked off the 17-day sales festival, called the “Korea Donghaeng Sale” campaign, on June 26 in an effort to boost faltering domestic demand amid the coronavirus outbreak. “Donghaeng” means ‘going along together’ in Korean.
Major department stores, the sector hit hard by the virus outbreak, posted an increase in sales as people bought luxury items as part of “revenge spending” amid the Covid-19 pandemic, according to industry watchers.
Lotte Department Store saw sales rise 4 percent year on year between June 26 and July 9.
Number two player Shinsegae Department Store, and smaller rival Hyundai Department Store, posted increases of 11.3 percent and 6.3 percent, respectively.
But discount-store chains posted a similar level of sales or a marginal decline despite big discount events targeting the sales festival.
The operators of discount-store chains are obligated to close outlets on the second and fourth Sunday of every month under regulations designed to help smaller neighborhood shops. That meant they had to shut down outlets yesterday, the last day of the sales fest.
Traditional markets posted a letup in their sales declines last week, but merchants said they did not directly feel the impact of the sales festival.
Questions & Answers
Q.Which specific types of retailers benefited most from the government-led retail sale festival?
Which specific types of retailers benefited most from the government-led retail sale festival?
Major department stores saw increased revenue, particularly due to high demand for luxury goods. Lotte, Shinsegae, and Hyundai Department Stores all reported sales increases during the festival period.
Q.Why did discount store chains and traditional markets not see the expected sales boost from the festival?
Why did discount store chains and traditional markets not see the expected sales boost from the festival?
Discount store chains faced compulsory closures, including on the festival's last day, and both they and traditional markets lacked effective promotion strategies. Traditional markets also reported not directly feeling the festival's impact.
Q.What was the primary reason consumers increased their spending at department stores during the festival?
What was the primary reason consumers increased their spending at department stores during the festival?
Industry watchers attribute the rise in sales at department stores to 'revenge spending'. Consumers bought luxury items as a response to the Covid-19 pandemic, leading to increased revenue for these retailers.
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