SEOUL — As the world struggles to analyze the implications of North Korea’s change in leadership, observers also are concerned over what impact it might have on South Korea, a key market for global fashion brands.
In the long run, experts said, the uncertainly created by the death of North Korean leader Kim Jong-il could further dampen consumer sentiment and spending. Sales of the three major department store chains — Lotte, Shinsegae and Hyundai — dropped 1.1 percent in November from a year earlier, according to the Ministry of Strategy and Finance. It is their first loss in revenue since a 0.3 percent decline in February 2009 amid global financial jitters from the Wall Street meltdown.
After hitting a peak of a 24 percent year-on-year surge in January, revenue growth has slipped to single digits since May, with the slowing pace accelerating from August. The sales drop coincides with a surge in household debt and increased late debt and interest payments at banks. The country’s household debt is expected to increase by 60 trillion won, or $51.87 billion at current exchange, from last year to top 900 trillion won, or $778.16 billion, by the end of the year. RELATED STORY: Bangkok Sees Luxury Retail Market Expand >>
The data suggest South Koreans are having a hard time meeting their debt payments, which will likely restrain shopping. Worse, financial authorities and experts fear the debt problem that has been so far restricted to the low-income segment of the population could spill over to the higher-income bracket, with serious implications for fashion and luxury brands.
“Consumers are already feeling insecure due to weakened affordability and fears of economic slowdown. If instability in North Korea pans out long, consumer sentiment could further deteriorate,” said Lee Seung-joon, a researcher at HI Investment & Securities.
For now, though, it’s relatively business as usual among retailers in South Korea, despite the news of Kim Jong-il’s death and his succession by his youngest son, Kim Jong-un. Shinsegae Department Store, in a posh neighborhood in southern Seoul, was crammed with customers busy with last-minute holiday shopping late last week. Department stores were aggressively promoting deals, extending sales periods and increasing shopping hours in the hopes of persuading consumers to open their wallets.
But when Kim’s death was revealed on Dec. 17, there was no panicked shopping to hoard canned food, instant ramen, and bottled water in fear of a war, as happened in 1994 when Kim’s father and North Korea’s founder Kim Il-sung died.
“The department store was practically empty around noontime soon after the news [of Kim’s death], but in the afternoon customers returned,” said Kwon Yoon-hee, a saleswoman at the Zadig & Voltaire outlet in Shinsegae Department Store. “The business was slow the first and second day [after the news], but, thankfully, holiday shopping picked up before Christmas Eve,” she added.
Another Shinsegae official said affordable luxury items like Hermès scarves and leather products on special vending corners were already sold out.
Sales at TV home shopping channels were also unaffected. While declining to disclose details, an insider of a major TV home shopping channel hinted sales were in fact helped by the news of Kim’s death. “At times of extraordinary news like Kim’s death, people have TV on all day. But they get fatigued by hearing the same news and turn to other channels. They usually stop at home shopping channels and make a call if they see a deal they like,” she said.
She said her company also launched popular deals that day to take advantage of increased TV viewership.
Alberta Ferretti's "Rainbow Week" sweaters are back. The designer closed her #MFW show with a few day-of-the-week sweaters, which first debuted on the catwalk last January as part of the pre-fall 2017 collection. #wwdfashion (📷: @delphineachard)