"Preparing for Stage 3" Diverging Year-End Peak in the Distribution Industry

Preparing Countermeasures Ahead of Imminent Upgrade
Department Stores Prepare for Business Suspension
Offline Events Shifted Online
Active Use of Live Broadcasts Planned
Duty-Free Shops Focus on Selling Luxury Stock via Online Malls

Large Marts Likely to Remain Open
Considering Limits on Number of Customers per Product
Online Shopping Malls to Gain Reflective Benefits

On the 13th, when the mandatory mask-wearing measure was fully implemented, related notices were installed at Lotte Department Store in Jung-gu, Seoul. From this day forward, a fine of up to 100,000 won will be imposed for not wearing a mask in multi-use facilities such as public transportation, medical institutions, assembly and protest sites, and indoor sports venues. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Lim Hye-seon] The distribution industry is busy preparing countermeasures in response to the possibility of raising social distancing to level 3. This is because the number of confirmed cases of the novel coronavirus infection (COVID-19) has met the level 3 criteria (800-1000 nationwide, rapid doubling of cases), prompting the government to begin internal review. Major distribution companies such as department stores are reviewing countermeasures with the possibility of business suspension in mind.

Level 3 Emergency, Department Stores to Close

According to the distribution industry on the 18th, if social distancing is raised to level 3, distribution facilities classified as large-scale stores (retail stores with an area of 300㎡ or more) under the Distribution Industry Development Act will be subject to assembly bans and business suspension. Department stores are promoting plans to convert offline store events to online and increase live broadcasts. They plan to actively utilize live broadcasts, which have recently become more popular. In the case of Lotte Department Store, the number of live broadcast recordings surged from 30 times per month at the beginning of this year to 160 times per month last month. The filming locations have also diversified beyond stores to studios and other places. To capture year-end demand, they are also expanding product categories on their own online shopping mall. They are increasing high-priced products and strengthening products centered on year-end gifts. A department store official explained, "Luxury sales increased by 30-40% in July, the summer vacation season, compared to the previous year," adding, "We expect sales of high-priced products to increase again this year-end and are negotiating with brands to sell related products online."

Offline store sales account for about 90% of department stores' total sales. If they close, they will lose 30 to 40 billion KRW in sales per store per day. If level 3 is activated, about 90 locations including the big three department stores in the distribution industry (Lotte, Shinsegae, Hyundai) and outlets will close. Approximately 140,000 employees, excluding essential personnel, will start working from home. A department store official said, "We will increase the number of workers in the online sector where demand is expected to surge," adding, "Small and medium-sized partner companies may find it harder to endure than department stores."

Duty-Free Shops to Dispose of Luxury Inventory Online

In the case of duty-free shops, there are no specific guidelines yet, so they are closely watching government announcements. A duty-free shop official said, "We are anxiously concerned that stores classified as large-scale stores may also have to close." Duty-free shops plan to focus on selling luxury inventory through their own online malls to capture year-end gift demand. Lotte Duty Free is offering over 1,300 fashion items such as bags, shoes, and sunglasses from 33 popular luxury brands including Chlo? and Alexander McQueen at discounts of up to 80% on its domestic customs clearance exclusive online shop 'Lux Mall.' Shinsegae Duty Free is also offering over 1,510 products from 58 brands including Montblanc and Breitling at discounts of up to 70% on the duty-free shopping online mall 'SSG Special.'

For large supermarkets, a plan is being finalized to allow them to remain open even if level 3 is implemented. The government is considering allowing business by limiting the products sold and the number of customers admitted. This is based on the fact that there have been almost no cases of cluster infections linked to large supermarkets so far. Since the number of confirmed cases exceeded 1,000 on the 12th, public anxiety about a possible 'shutdown of daily life' has increased. Although panic buying has not fully materialized, sales of ramen, bottled water, and rice surged at large supermarkets as people tried to stock up on daily necessities. From the 11th to the 15th, Lotte Department Store sales increased by 13% compared to the previous week. Among these, ramen sales rose by 31.3%, cup rice by 12.7%, and rice and porridge by 12.3%. A large supermarket official explained, "We are increasing inventory levels mainly for daily necessities."

Online shopping malls are preparing for a surge in orders along with expectations of a windfall benefit. Some online malls such as Market Kurly and Oasis closed orders earlier than usual due to high demand. Market Kurly saw a 16% increase in orders last weekend compared to the previous weekend. As of the 15th, SSG.com recorded a 99% operation rate (order processing capacity vs. order volume) for SSG Delivery (same-day daytime delivery) and 97% for dawn delivery. Oasis's volume also reached 100,000 orders per day, hitting the maximum processing capacity threshold. An online shopping company official said, "90% of the delivered items are fresh and processed foods," adding, "If online delivery volume increases, we plan to increase delivery vehicles and related personnel to avoid delivery problems."

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