Luxury Goods and Home Appliances Drive Growth... Department Stores Anticipate Rebound in Q4

Sales Recovery Starting from Chuseok Holiday... Double-Digit Growth in Early October
High-End Home Appliance Sales Surge as Travel Stops and Home Time Increases

[Asia Economy Reporter Lim Hye-seon] Department store sales, which had shrunk due to the impact of the novel coronavirus infection (COVID-19), are gradually recovering. Sales, which had declined due to the strengthening of social distancing to level 2.5, have shown a recovery trend since the Chuseok holiday, recording double-digit growth for the first time this year in October.

Department Stores Rapidly Recover Sales After the Holiday

On the 13th, Shinsegae Department Store announced that total sales in September were 345.3 billion KRW, a 1.3% decrease compared to the same period last year. Compared to the previous month of August (272.7 billion KRW), sales increased by 26.6%. Total sales for the third quarter were 920.4 billion KRW, down 3.3% from 952.6 billion KRW in the same period last year. Total sales from January to September this year amounted to 2.6878 trillion KRW, a 6.0% decrease.

Looking at the monthly sales growth rate trend, sales hit bottom in February (-15.2%) and March (-28.1%) when the COVID-19 outbreak began, then showed rapid normalization starting in May. In June, sales increased by 3.0%, marking the first positive growth this year. In August (-10.0%), sales faced another setback due to the strengthening of social distancing to level 2.5, but since the Chuseok holiday in September, sales have been recovering again. A Shinsegae official explained, "Until early September, sales were sluggish due to the impact of strengthened distancing measures, but after mid-September, sales surged as Chuseok gift sets were sold." In fact, sales from the 1st to the 11th of this month increased by 18.3% compared to the same period last year.

Lotte Department Store and Hyundai Department Store are showing similar trends. Lotte Department Store's sales dropped sharply by 22.0% and 34.0% in February and March, respectively, but have since shown single-digit declines. Hyundai Department Store showed signs of recovery after February (-17.0%) and March (-32.1%), rebounding by 1.2% in June. Although sales slowed in August (-2.7%), they have been normalizing again since September.

Luxury Goods Lead, Home Appliances Follow

The reason department stores have been able to emerge from the recession tunnel is thanks to the sharp sales growth of high-priced products such as overseas luxury goods and home appliances. Except for February and March, monthly sales of luxury goods and home appliances grew by double digits compared to the same period last year. With overseas travel restricted, consumption explosively increased centered on high-priced luxury goods as an alternative to travel. Additionally, as people spent more time at home, they turned their attention to furniture and home appliances. Shinsegae Department Store's overseas luxury goods sales soared by 37.8%, 39.6%, and 49.4% in May, June, and July, respectively. The home appliance category also saw sales growth exceeding 50% in June.

In the case of Lotte Department Store, luxury goods sales surged by 34.0% and 29.0% in July and August, the summer vacation season. Home appliance sales have grown by more than 20% every month since May. This trend continued through the Chuseok and Hangeul Day holidays. During this period, overseas luxury goods sales increased by 11% at Lotte Department Store, 30.8% at Hyundai Department Store, and 30.0% at Shinsegae Department Store compared to the previous year's sale period. Shinsegae Department Store's home and appliance sales also grew by 56.0% and 42.5%, respectively.

Retail Industry: "If Fashion Recovers in Q4, Normalization Expected"

The department store industry expects the sales growth trend to continue until the end of the year unless the number of COVID-19 confirmed cases rises sharply. A department store official said, "The fashion category, which recorded the worst sales in history, is improving as the weather gets colder," adding, "Since expensive winter clothing accounts for a large portion of annual sales, fashion is expected to recover in the fourth quarter." He continued, "We are putting all our efforts into fourth-quarter sales," and said, "We are planning various marketing strategies every month to attract customers, such as discount events."

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