Fast fashion chains breathe fresh air into Seouls retail landscape
It was a cold winter. Even until mid of February, my phone read a temperature of minus 15 degrees. I had to walk through Myeong-dong to a meeting with being in the brace of such a cold snap while thinking people would be doing the sensible thing and staying indoors. However, the area was packed and the whole trip was spent weaving through swathes of shoppers all staggering under the weight of shopping bags full to the bursting. From the Lotte and Shinsegae department stores to the labyrinth of cosmetic shops to the towering heights of Noon Square, home to H&M and Zara, shoppers are coming in their droves to take advantage of the seasonal sales.
This afternoon, I more clearly saw the heralds of spring are upon us. Downtown streets were crammed into lightly clad shoppers, even ones wearing short-sleeved shirt with quick waltzing steps.
The dramatic seasonal change is expected to continue in the retail industry following last year like the defiance of the cold. Retailers in Korea seem to have enjoyed the robust pick-up last year. The economic recovery domestically, as well as almost 9 million tourists entering the country, means retailers are reaping the benefits. And sales of imported goods have seen a growth in 2010 of 23 percent. More and more foreign retailers, who had previously ignored Korea, are seeing the success of others and are now desperate to jump on the band wagon.
H&M, Zara, Forever 21 and Uniqlo have transformed the casual fashion market and the domestic retailers are desperately trying to play catch up introducing their own lines to try and compete. All of this new competition has been fantastic for the consumer _ greater choice, higher quality at more competitive pricing. And as an expat, the ability to buy a casual shirt with sleeves extending past your mid forearm is more than welcome.
The outlook for the retail market for 2011 looks like that nothing will change and not just in the prime area of Myeong-dong. Gangnam Station continues its meteoric rise and Garousgil, the fashionable tree lined street in Apgujeong is also proving very successful for retailers. These areas are now on the wish list for most brand owners, and due to a lack of quality available stock the rents are rising dramatically.
Myeong-dong has seen a 10 percent increase in rental prices and is now the 8th most expensive retail location in the WORLD at 602,000 KRW per month per sq m. Gangnam Station is not far behind at 500,000 KRW per month per sq m but recent transactions are showing that these rents are due to rise closer to those in Myeong-dong.
The strength of the department stores of Lotte, Shinsegae and Hyundai have proved a tight noose round the neck on the ability for new independent operators to enter the market, however a big shift is being seen where private developers are creating new shopping centres with a wider and more varied tenant mix that the department stores are not able to offer. With construction coming to an end later this year on big Western-style shopping malls such as IFC in Yeouido and D Cube in Yeongdeungpo, Seoul’s image as a great shopping destination in the Asia Pacific region is set to grow.
The business model that the likes of H&M and Zara use of good quality fashionable clothes at reasonable prices is proving a great success here and local retailers who have also learnt from this are set to have another bumper year. Unfortunately, those who are just behind the latest fashion or are not offering value for money are going to find times hard as rents rise and sales fall as the retail education amongst Koreans gets stronger and stronger.
James assersohn is Associate Director of retail services at Cushman & Wakefield in Seoul