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By Jane Han
Staff Reporter
``Discounts on luxury goods.'' These words fronted by Shinsegae Chelsea were enough to entice throngs of brand conscious local shoppers when the joint venture opened the country's No. 1 American-style high fashion outlet in Yeoju, southeast Seoul last year. But the retailer proved that, at the end of the day, it takes more than words to ring up good sales.
At its one year anniversary, the luxury fashion mall finds itself battling media reports on its less-than-impressive profits and facing shoppers' complaints over its lack of inventory and no-refund policy.
Shinsegae Chelsea ― a 50-50 joint venture between domestic retail giant Shinsegae and U.S.-based Simon Property Group ― barely reached 430 million won ($436,000) in net profit between June and December 2007, according to the Korean firm's audit report. Its operating profit totaled 1.7 billion won.
Compared to these figures, it's been reported that Shinsegae coughed up approximately 2.7 billion won in royalties to Chelsea for the first year. Critics say it is a losing game for Shinsegae, which originally set a sales target of between 160 billion and 200 billion won during the first 12 months. The company did not disclose detailed figures of its annual revenue.
Part of the reason for the lukewarm performance is attributed mainly to the premium outlet's not-so-premium collection.
Only 18 brands out of the 122 stores in Yeoju are considered ``luxury.'' Some of them include Armani, Hugo Boss, Gucci and Burberry. However, shoppers say this isn't enough to encourage them to drive two hours out of Seoul.
``I went twice, but both times I was disappointed with the weak selection,'' said Kim Tae-young, a 28-year-old office worker, who claims her expectations were too high based on her Premium Outlet experience overseas. Simon Property Group operates more than 60 Premium Outlets worldwide.
``The Yeoju Outlet definitely seems to fall far behind other locations, particularly in the U.S.,'' says Kim Ji-na, a 26-year-old shopper, who has been to three Premium Outlets in the U.S. and two in Japan.
Industry sources say the Yeoju Outlet faces this inventory problem because the regular luxury shops are hesitant to send items off to the discount store, worrying that they will permanently lose shoppers.
``Not a lot of goods are even left over from the regular stores anyway because luxury items are always on high demand,'' said one executive of a Seoul department store.
With such chronic problem looming, critics say that Yeoju Outlet may need more time to settle or it may end up settling as people's weekend picnic destination.
jhan@koreatimes.co.kr
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