Get a demo Do I subscribe? News sign-up
Print

Korean retailers face online hurdle

News, 05 January 2015

SEOUL: Bricks and mortar retailers in South Korea are struggling to cope with the competition posed by their online rivals, the latest official statistics suggest.

According to data issued by two government agencies, the National Tax Service and Statistics Korea, the number of physical store retailers in the country declined by 4% over the last year from 806,000 to 772,000.

Even though South Korea's economic downturn would have played its part, analysts agreed that a major cause has been the rise of online shopping as a convenient and mobile alternative, Inside Retail Asia reported.

Other sectors have proven vulnerable, too, as the official data revealed 600 service businesses in the finance and insurance sector closed in 2014 after customers switched their transactions online.

In addition, 2014 saw the closure of about 7,000 PC gaming and internet "rooms", while 500 restaurants closed and a full 14,000 restaurants and bars recorded nil sales.

The Finance Ministry reported that combined sales at the country's top three department stores fell 5.6% year-on-year in November 2014, yet the popularity of foreign online retailers remains undimmed, the Wall Street Journal reported.

For example, imports of goods ordered via overseas online vendors – particularly Amazon, eBay and Gap – increased by almost a third (30%) in November compared to the same period in 2013. Meanwhile, goods ordered from overseas online retailers reached a record 1.1 trillion won last year.

"The growing popularity of online shopping among Koreans means [an] intensifying headache for department stores, which are rapidly losing customers to their online rivals," said Ryu Young-ho, an analyst with Daweoo Securities.

He added that Korean department stores would continue to struggle as consumers cut back on their spending during the economic slowdown.

"Except for the few weeks in which they offer huge discounts to rival foreign online retailers, their goods are more expensive for most of the time around the year," he said.

Data sourced from Inside Retail Asia, Wall Street Journal; additional content by Warc staff