SEOUL — South Korean retail is showing signs of a pickup, with the country’s top three department store operators reporting double-digit jumps in August sales — although observers are still questioning the longer-term health of the economy.
Lotte, Hyundai and Shinsegae reported a collective 13.4 percent increase in August sales, based on an average of each retailer’s growth figures. That compares with the retailers’ average growth of 2 percent in July. The companies cited a number of factors, including that a major holiday came early this year, consumer sentiment is recovering after the Sewol ferry tragedy in April, and the numbers are against a weak comparative base.
“The biggest reason for this increase in sales is because Chuseok [a Korean holiday] took place earlier this year,” said a Shinsegae spokesman. Chuseok, or “Thanksgiving,” is arguably Korea’s most important holiday, and it took place this year on Sept. 8, about a week earlier than usual, so consumers shopped earlier to prepare.
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“Because of this and the cooler weather, there’s been a higher demand for fall clothing. People began to do their shopping earlier,” the Shinsegae spokesman said. “Sales are, in fact, drastically higher compared with those of last year. And I expect these figures will continue to be stable for the remainder of the year.”
A spokesman for Hyundai said: “Sales were so low last year that of course things look comparably better this year.”
Lotte Department Store reported a 14.5 percent increase in August’s retail sales, while Hyundai reported a rise of 14.1 percent, and Shinsegae saw an increase of 11.7 percent.
Seasonal winter goods such as padded jackets and furs sold well, but some of summer’s bestsellers also continued to do well in August. Retailers were surprised to see summer items selling well over the past month. “Our top-selling items were actually shorts,” said the Hyundai spokesman. “HotPants were a popular item over the entire summer. I also expect that premium padding wear — for instance, brands such as Canada Goose — will continue to be popular into the fall.”
Still, observers say the South Korean domestic economy has only just begun to recover from the societal impact of the Sewol tragedy. The sinking of the ill-fated ferry and the high number of fatalities sent much of the nation into mourning, which lasted until late summer. With usual summer events such as concerts and festivals postponed in light of the accident, retailers also took a more somber approach to sales.
“After the Sewol tragedy, public morale was low. But now, the economy is slowly reviving,” said a Lotte spokesman. “New tax policies have helped improve the situation. The government is loosening up on real estate taxes to restore the domestic economy, so people are willing to spend more on retail these days.”
Despite recent improvements, the Korea Development Institute (KDI) said earlier this month that the South Korean economy is still recovering at a “feeble pace.”
“Private consumption is on a slow-growth trajectory…indicating a delay in the recovery of domestic demand,” the think tank said. KDI reported a “sluggish” 0.7 percent rate of growth in the retail sector for the second quarter of this year.
John Rhee, a fund manager at Artix Korea and senior adviser with the Korea Creative Content Agency, expressed a cautious view on the country’s economic outlook.
“The government has helped make it feel to consumers and certain industries that the market has picked up again, but that’s actually not true,” Rhee said. “The momentum and growth that needs to take place for that to happen is not picking up. There is no clearly growing industry.
Rhee said that the fashion retail industry has been unduly affected by the poor condition of the nation’s economy. “The retail industry is always affected by the overall general economy,” he said. “As the overall growth has slowed down quite a bit, there’s concern about the instability that has been existing in the Korean market, and there’s no other way around it.… Consumers would prefer to put their money into gold, or other stable products, rather than into another Louis Vuitton bag.”