By Kim Jae-won
Department stores are experiencing a sharp pullback in sales amid the deepening economic downturn, according to industry figures and government data.
Major chains Lotte and Shinsegae saw their monthly revenue rise only 1.2 percent and 1.6 percent during the summer sales period from late June to mid-July. Last year department stores saw their monthly sales rise more than 10 percent after their summer sales and even that was considered a disappointment.
So obviously, these are quite depressing times for high-end retailers.
Market watchers say that the disappointing business at department stores show that the impact of the downturn has now widened to the middle class and high-income earners.
This year, department stores resemble suburban discount malls, putting up sales promotion after sales promotion and extending their annual summer bargain events a week longer than usual. And while 20 to 30 percent discounts were the norm in previous years, 50 to 70 percent discounts have now become common.
Lotte recently advertised key items at a discount rate of 40 to 70 percent, while Shinsegae offered 50 percent discounts for popular fashion brands often exempt from such sales like Tommy Hilfiger and Bean Pole.
Overall revenue at Korean department stores and discount chains fell from a year earlier in June, according to Ministry of Knowledge Economy data. Combined sales of the three major department store chains — Lotte, Hyundai and Shinsegae — have been falling 2 percent annually.
The drop was largely led by weak demand in men’s and women’s suits, which the ministry said resulted from the growing popularity of cool and simple work clothes during the hot season.
Sales of men’s suits plunged 9.7 percent year-on-year in June, with those of women’s clothing also falling 6 percent, according to the Ministry of Knowledge Economy.
Discount outlet chains have also suffered from empty aisles and shopping carts. Sales at the country’s three major discount outlet chains dropped 7.2 percent in June from the same period in 2011, according to the ministry. The outlet chains are Lotte Mart, E-Mart and Homeplus.
June marked the third consecutive month combined sales of the three outlet chains lost ground on a year-on-year basis.
“Sales of fresh foodstuff fell amid price hikes caused by floods and scarce supplies, which, along with the newly-enforced shutdown (of outlet stores) on Sundays, led to weaker sales,” the ministry said in a press release.