South Korean department stores face choppy waters ahead but the opportunities for international e-tailers are huge in that country. That’s the only conclusion you …
South Korean department stores face choppy waters ahead but the opportunities for international e-tailers are huge in that country. That’s the only conclusion you can draw from the official retailer figures that have just been released.
While the online surge has been shaking up retail the world over, last year South Korean department store operators became the biggest casualties of the trend. And they’ve got more woes ahead.
The sector suffered its first sales decline in a decade during 2014 as South Koreans went shopping on their smartphones, according to data from Statistics Korea.
Department store sales slipped 1.9% year-on-year to KRW29.2trn as online sales surged 17.5% on-year to nearly KRW45.2trn. That rise was mainly driven by mobile shopping, which leapt 126% to KRW14.8trn.
Those figures wouldn’t be a problem in themselves for department store chains as their strength in the domestic market potentially positions them to maximise their returns from e-tail. So what’s the problem?
With m-commerce seen as the biggest growth area for retail at the moment and shoppers in Asia use their phones as their first port of call for web browsing, savvy domestic retailers are working hard on their omnichannel strategies. All fine so far.
But – and of course, there’s always a ‘but’ – some of the biggest growth is coming from online shopping from overseas sites. Last year, South Koreans spent $975m buying clothing, bags and footwear from overseas sites. That’s not a huge figure in relation to Korean retail overall but it was up 37% from $709.3m a year earlier, according to the Korea Customs Service (KCS). And that growth is continuing.
Not that department stores can blame consumers for buying products online that they themselves don’t sell.
Nearly half of products sold at online were fashion/apparel and beauty items. Beauty sales increased 26.8% year-on-year, while fashion/clothing jumped 16.7%, according to the data.
There were nearly 15.53m direct deals worth $1.54bn reported last year, the KCS said.
Officials and analysts highlighted the fact that department stores took the brunt of the boom in online shopping and direct buying from overseas online shopping malls, noting they will also face tougher challenges ahead from the trend.
“Overall, the shopping trend is shifting to online market places, which has resulted in reducing the number of customers at department stores,” Hong Sung-soo, a senior analyst at NH Investment and Securities told The Korean Times. “I think deep-pocketed people will remain loyal to the stores, while the loyalty of middle- and low-income earners will continue to wane.”