Gwangju Chamber of Commerce, 1st Quarter Retail Distribution Industry Outlook 'Deterioration'

[Asia Economy Honam Reporting Headquarters Reporter Park Seon-gang] The Gwangju Chamber of Commerce and Industry (Chairman Jeong Chang-seon) announced on the 21st that the '2020 Q1 Retail Business Survey Index (RBSI)' for 67 retail and distribution companies in the Gwangju area recorded '74', down 7 points from the previous quarter (81).

The Retail Business Survey Index (RBSI) quantifies the on-site business sentiment of distribution companies. An index above 100 indicates that more companies expect the next quarter's business to improve compared to the current quarter, while below 100 indicates the opposite.

By business type, department stores (100→75) and supermarkets (74→63) saw a decline in the business outlook index compared to the previous quarter, while large discount stores (73→82) and convenience stores (81→82) also forecast continued business downturn.

Large discount stores (73→82) are expected to continue facing business difficulties despite positive factors such as holidays, due to domestic demand contraction, changes in consumption structure (increase in single-person households and online purchases), and worsening domestic and international economic conditions including Japan's export restrictions.

Convenience stores (81→82) predicted a negative business outlook similar to the previous quarter, influenced by school vacations, seasonal factors, and ongoing domestic demand recession leading to reduced consumption.

Department stores (100→75) experienced a significant 25-point drop. Unlike the previous quarter, which was the peak season for winter clothing and cold-weather products, the first quarter lacked positive factors, and business conditions are expected to worsen due to sluggish consumption and rising management costs.

Supermarkets (74→63) also anticipate continued business recession with decreased sales caused by domestic demand contraction, changes in consumption structure, and an increase in medium-sized discount stores.

Meanwhile, the employment outlook index for the retail distribution industry in Gwangju for the first quarter was '84', falling below the baseline (100) for five consecutive quarters since last year. Employment reduction is expected to continue due to poor sales and increased labor costs caused by government regulations.

The biggest difficulty in business activities was cited as 'contraction of consumer sentiment (55.2%)', followed by 'cost increases (labor, finance, logistics, etc.) (23.9%)', 'intensified competition within and between business types (14.9%)', 'government regulations (4.5%)', and 'others (population decrease due to nearby redevelopment) (1.5%)'.

Regarding government efforts to enhance the competitiveness of the distribution industry, 'regulatory relaxation (55.2%)' accounted for the largest share, followed by 'minimum wage reduction and adjustment (16.4%)', 'policy support at the level of manufacturing industry (11.9%)', 'training of professionals (3.0%)', 'support for new product development and commercialization (3.0%)', 'support for overseas expansion (1.5%)', 'restraining new store openings (1.5%)', and 'economic revitalization (1.5%)'.

A representative of the Gwangju Chamber of Commerce and Industry said, "As domestic and international economic downturns such as domestic demand recession and the Japan boycott continue, retail and distribution companies are experiencing business recession for two consecutive quarters. In addition to regulatory relaxation and policy support, the government needs to make multifaceted efforts to revitalize the economy to help retail and distribution companies struggling with consumption contraction and rising management costs such as labor costs."

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