COVID-19 Survival Strategy... Fashion Companies' Own Online Stores See Sales Jump Up to 2x

[Asia Economy Reporter Yujin Cho] Domestic fashion companies have focused their efforts on online sales as a desperate measure amid the spread of the novel coronavirus infection (COVID-19), resulting in related sales nearly doubling last month. However, due to the sharp decline in demand at offline stores, which account for a high proportion of sales, poor performance is expected in the first quarter of this year.

According to the industry on the 12th, the sales of SI Village, the online mall operated by Shinsegae International, nearly doubled in February compared to the same month last year. A Shinsegae International official said, "Offline sales channels were severely hit by the sharp drop in demand caused by the COVID-19 situation, but the online mall performed well, with sales nearly doubling last month compared to the same period last year." LF’s own mall, LF Mall, and Samsung C&T’s SSF Shop also recorded double-digit sales growth last month. A Samsung C&T official explained, "Last month, the sales growth rate of our own mall was unusually higher than the combined sales growth rate with external partner malls."

As COVID-19 entered a prolonged phase, fashion companies continued to strengthen their online channels as a countermeasure against the contraction of offline consumption. Shinsegae International focused on enhancing online competitiveness by increasing the number of domestic and international designer brands entering its own mall. A Shinsegae International official explained, "SI Village newly launched the British jewelry brand 'Monica Vinader' this month through its own select shop 'Select 449' and significantly strengthened the jewelry category, including accessories that are not seasonal." In addition to Monica Vinader, the number of newly entered brands increased to five in the past two months.

The growth in sales of domestic fashion companies’ own malls was driven by strengthening non-seasonal product categories and event strategies. As consumer sentiment shrank due to COVID-19, more consumers opened their wallets for non-seasonal products or discount promotions. An LF official said, "In February, we focused on accessories that are not highly seasonal and beauty products centered on new items for our main event items. We also planned promotions for online-exclusive lines such as 'JSNY' by Jill Stuart New York and 'Fizz' by Hazzys, actively targeting Generation Z, which has strong purchasing power online, and this yielded good results."

However, as the poor performance of offline channels, which account for a large share of sales, continues, a deterioration in first-quarter earnings is inevitable. Inside and outside the industry expect that most fashion companies will record a domestic sales decline of around 10% in the first quarter of this year, including March, when the COVID-19 spread is expected to peak. For Shinsegae International, which relies heavily on profits from China and duty-free sectors, the decline in profits is expected to be even greater. Shinsegae International’s estimated operating profit on a consolidated basis for the first quarter is 24.8 billion KRW, down 15.07% from the same period last year. During the same period, LF’s operating profit is estimated to decrease by 9.40% to 39.5 billion KRW.

This content was produced with the assistance of AI translation services.