Search

ASIA
ECONOMY | Staff Reporter, Korea
Published: 18 May 12
700 views


Korea's department stores suffer biggest decline in 3 years

Store sales fell by 3.4% as both luxury goods and discount products experience a drop in consumer purchases, by 5.9% and 2.4% respectively.

Growth momentum of luxury goods sales has started to weaken after the previous economic recovery. In 1Q12, luxury goods sales rose only 6.9% and then dropped in April.

The weakening trend in department store saleswas caused by the negative wealth effect and tightened consumer credit. 

Here's more from the research by Morgan Stanley:

Korea's department store sales declined 3.4% YoY in April compared to the gain of 1.6% in March. It was the biggest decline in almost three years if January is to be excluded, which was affected by the Lunar New Year holidays. In particular, luxury goods sales declined 5.9% YoY in April, the first decline in two years. Discount store sales were also weak, down 2.4% YoY in April compared to the gain of 3.2% in March.

Weakening Growth Momentum of Luxury Goods Sales

Luxury goods sales were once a major driver for department store sales. In 2011, luxury goods sales jumped 20.7%, after showing strong growth of 11.3% in 2010 and 16.7% in 2009. It was far higher than the average growth of department store sales at 8.4% in 2009-11.

The strong sales of luxury goods were powered by the solid economic recovery after the global financial crisis, which benefited the higher-income households more than the lower-income households. However, the growth momentum of luxury goods sales has started to weaken. In 1Q12, luxury goods sales rose only 6.9%, and they showed a decline of 5.9% in April.

Negative Wealth Effect and Tightened Credit Affecting Consumption

The weakening trend in department store sales, luxury goods sales in particular, was caused by the negative wealth effect and tightened consumer credit. In March and April, Kospi declined 0.8 % and 1.6% respectively, as inventors again turned bearish over the economic recovery outlook.

Meanwhile, Korea's property market remained stagnant, and the property price in Seoul has been declining for 11 consecutive months. Banks also tightened consumer loans as government was becoming cautious about high household debt in Korea. The average growth of household loans decelerated to 4.7% YoY in 1Q12 compared to 5.9% growth in 2011.  



Sign up for our newsletter

 

Do you know more about this story? Contact us anonymously through this link.

Click here to learn about advertising, content sponsorship, events & rountables, custom media solutions, whitepaper writing, sales leads or eDM opportunities with us.

To get a media kit and information on advertising or sponsoring click here.

Tags: Korea, consumer, department store, sales, luxury, discount, items

CO-WRITTEN ARTICLES & SPONSOR CONTENT ››

What you need to know about E-access services.
469 views

Creative Genius Asia shares why businessmen should consider producing films and television shows in the US.
202 views

LATEST ECONOMY JOBS »
  • No jobs posted on this category.
    PRINT ISSUE »

    Subscribe Now
    Cash-flush tourists in HK

    128 views

    Is Central Hong Kong a ghost town in the making?

    240 views

    As goes Singapore, so goes Hong Kong?

    207 views

    MOST READ EXCLUSIVES

    Hong Kong’s 10 Most Expensive Credit Cards

    Hong Kong’s 10 Most Expensive Credit Cards

    It’s all about exclusivity.

    by STAFF REPORTER
    24 Jul 2014 | 14029 views
     

    Hong Kong’s 6 hot new restaurants in July

    Hong Kong’s 6 hot new restaurants in July

    Have you tried eating pancake with a cocktail?

    by KRISANA GALLEZO
    5 Aug 2014 | 2626 views

    Take a tour at Facebook Hong Kong’s new office

    Take a tour at Facebook Hong Kong’s new office

    See how the staff named the meeting rooms and spaces in colloquial terms.

    by KRISANA GALLEZO
    28 Jul 2014 | 2581 views
     

    Hong Kong’s 12 MBA Programmes under $300,000

    Hong Kong’s 12 MBA Programmes under $300,000

    The cheapest is at HKD61,600.

    by KRISANA GALLEZO
    9 Jul 2014 | 2446 views

    Hong Kong’s 6 hot new restaurants in August

    Hong Kong’s 6 hot new restaurants in August

    Warm your belly with these top picks.

    by KRISANA GALLEZO
    5 Sep 2014 | 1381 views
     

    This startup could be a good buddy for small scale businesses

    This startup could be a good buddy for small scale businesses

    You’d be asking hundreds of people just to like your page no more.

    by KRISANA GALLEZO
    30 Jun 2014 | 1021 views

    Former investment banker launched HK's first financial comparison site

    Former investment banker launched HK\'s first financial comparison site

    The startup raised $3m funding in just one year.

    by KRISANA GALLEZO
    23 Jun 2014 | 815 views
     

    How a startup was born from a simple jam meetup of two strangers

    How a startup was born from a simple jam meetup of two strangers

    It helps businesses to design user experience integrating the online and offline worlds.

    by KRISANA GALLEZO
    7 Jul 2014 | 541 views

    Here’s a 3D printing pen you can hold in your hand

    Here’s a 3D printing pen you can hold in your hand

    It’s a popular project which collected over US$2m from 26,457 backers during its 34-day crowdfunding campaign.

    by KRISANA GALLEZO
    26 Aug 2014 | 514 views
     

    Check out the new SupremeGold Experience Centre for BEA’s premier customers

    Check out the new SupremeGold Experience Centre for BEA’s premier customers

    Indulge your bank transactions with warm and comfortable space to enjoy and relax.

    by KRISANA GALLEZO
    14 Aug 2014 | 513 views

    Here’s a Facebook-like neighborhood social network just for Hong Kong

    Here’s a Facebook-like neighborhood social network just for Hong Kong

    Do you want to make sure that the person you are sharing the lift with is a neighbor and not a stranger?

    by KRISANA GALLEZO
    3 Sep 2014 | 499 views
     

    Franck Muller opens a Maison for luxury and cravings

    Franck Muller opens a Maison for luxury and cravings

    Its flagship store in HK comes with two new gourmet restaurants.

    by KRISANA GALLEZO
    27 Aug 2014 | 468 views

    Hello SaaS providers: This may be the startup for you to ramp up your revenue

    Hello SaaS providers: This may be the startup for you to ramp up your revenue

    Japan’s OnLab / Digital Garage believed so much on this that it provided $150,000 funding.

    by KRISANA GALLEZO
    17 Jul 2014 | 368 views
     

    HK startup develops an app that organizes photos and videos automatically

    HK startup develops an app that organizes photos and videos automatically

    This technology startup has raised over USD100K.

    by KRISANA GALLEZO
    24 Jul 2014 | 358 views

    From photo to print: Your phone cover just how you want it

    From photo to print: Your phone cover just how you want it

    Will this self-funded startup be the leading online provider of customized products?

    by KRISANA GALLEZO
    1 Aug 2014 | 176 views
     

    SocialAgent connects independent sales agents with companies

    SocialAgent connects independent sales agents with companies

    It aims to help companies to gain more sales leads and more customers.

    by KRISANA GALLEZO
    14 Aug 2014 | 70 views