Virus forcing customers to buy either high- or low-priced products

A young woman shops at a boutique in a luxury goods section of a department store in Seoul in this 2012 file photo. / Korea Times file

By Kim Jae-heun

The overall economic slump and decrease in consumption here following the outbreak of the new coronavirus has masked a clear polarization as seen in a 10 percent increase in sales of luxury goods.

The top three local department stores here have been the only retail businesses recording a surplus, with the Lotte, Shinsegae and Hyundai franchises showing a 16.7 percent, 16.4 percent and 15.3 percent rise in sales, respectively, between January and February compared to the same period last year.

Encouraged by these results, one of the nation's most popular luxury brands, Louis Vuitton, decided to raise the prices of its products last Wednesday at a time when other brands can hardly think of doing so due to sharp drops in sales.

In the retail market, consumer trends have changed such that people are buying either high- or low-priced products, and are shunning mid-range items.

Due to the cost structure, brick-and-mortar stores cannot offer better prices for the same products sold online.

However, the story is different for luxury goods because people want to see them first hand in boutiques before making purchases.

“When an item is over 1 million won, and this is only a rough number, customers hesitate to buy them online because they want to make sure they are buying what they want. Also, most people don't purchase luxury goods impulsively so external factors don't have much effect on their purchases,” a Lotte Shopping official said.

The food service industry is another sector that is showing a prominent polarization in consumption. Family restaurants that offered meals at between 20,000 won and 30,000 won per person garnered huge popularity in the early 2000s, but their sales have dropped rapidly in the last three years.

CJ Foodville closed down 14 VIP steak house franchises in 2018, and 20 more last year after continued losses. Ashley, another family restaurant franchise run by Eland Park, has seen 20 outlets shuttered since 2017.

Meanwhile, “fine dining” restaurants are in demand.

According to a Daily Hotel application, reservations at such restaurants have increased by 10 percent, constituting 35 percent of overall bookings.

The spread of the novel coronavirus has seen more people of means eat at these so-called fashionable restaurants where they can book separate rooms for private dining.

“Despite the virus situation, our private rooms have all been booked recently with more than 20 people asking for reservations on a daily basis,” said an Intercontinental Hotel representative.

Fast food franchises, on the other hand, have decided to offer lower prices for their meal items.

Shinsegae Food launched its No Brand Burger restaurant last August selling burgers for 1,900 won ($1.59); and sold over 80,000 in just six months.

“Premium” burger franchise Shake Shack has decided to keep its prices in the above 10,000 won range, as its domestic business is suffering no setbacks.

Since the American burger franchise came into Korea in 2016, it has opened 10 stores nationwide.

Local family restaurant firms have taken action lately to pursue “up-market” strategies with upgraded stores. CJ Foodville have raised the average price of its meals by 5,000 won from last December. Their first premium VIPS restaurant saw a 70 percent sales increase compared to that in the previous year.