"Waterfall in the City Center... Evolved Department Store with Artworks and Science Museum Achieves Record Performance"

Offline Innovation Led by Experience
Luxury Revenge Spending Concentration Synergy
Boosting Operating Profit Improvement

[Asia Economy Reporter Yuri Kim] The offline innovation led by the department store industry, emphasizing ‘experience,’ has produced meaningful results such as record-breaking performance. Along with strengthening luxury brand lineups to capture the wave of COVID-19 revenge consumption, expanding complex cultural and leisure content that can attract the MZ generation (Millennials + Generation Z) is expected to remain a key topic for the department store industry this year.

According to the distribution industry on the 11th, the three major department stores?Lotte, Shinsegae, and Hyundai?all posted strong results last year. Hyundai Department Store Group’s department store division recorded its highest-ever sales last year. Sales increased by 20.2% year-on-year to 2.1032 trillion KRW, surpassing the 2 trillion KRW mark for the first time. Operating profit rose 53.5% year-on-year to 304.8 billion KRW. Shinsegae Department Store also achieved a record high in operating profit, rising 101.6% year-on-year to 362.2 billion KRW. Sales increased 20% to 2.1365 trillion KRW. Lotte Department Store also posted a solid performance despite sluggishness in other channels within Lotte Shopping. Last year’s sales rose 8.8% year-on-year to 2.888 trillion KRW, and operating profit increased 6.4% to 349 billion KRW.

With overseas travel restrictions, consumer spending capacity concentrated on department stores, especially in the luxury category, resulting in significant external growth. Additionally, the growth of the fashion category, which has relatively high profit margins, also contributed to the improvement in operating profit. Last year, Shinsegae Department Store’s luxury sales increased 44.9% year-on-year, and growth in fashion categories such as overseas fashion (37%), women’s fashion (22.2%), and men’s fashion (20.8%) was also notable. Hyundai Department Store’s overseas luxury segment sales rose 38%, with overseas men’s fashion increasing by 59.6%.

Above all, it is evaluated that the major changes made to innovate offline stores amid the online channel offensive, including e-commerce, were effective. The market analyzed that the future the department store industry aims for can be seen in the new stores opened by the three department stores last year. They have evolved into a form where customers come not only to shop but also to eat, play, and experience, providing satisfaction that online channels cannot offer.

‘The Hyundai Seoul,’ which debuted in February last year, dedicated about half of its total area (89,100㎡) to indoor landscaping and resting spaces. On the 5th and 6th floors, an indoor landscaping space with trees was created in the central area where additional stores can be added, and a waterfall pouring from the height of the 3rd floor was installed to add visual enjoyment. The entire basement level 2 was designated as the ‘MZ Generation Zone,’ continuously showcasing pop-up stores of emerging brands. These changes encouraged many young people to join the ‘I’ve been there too’ trend. Posts related to The Hyundai Seoul on Instagram reached 340,000. There was also a significant change in the sales structure. With the renewal of the main store’s young fashion specialty hall and the creation of a VIP lounge exclusively for customers in their 20s and 30s, the number of Hyundai Department Store customers in their 20s and 30s increased by 86.7% and 54.2%, respectively, last year. Their sales proportion reached a record high of 43.4%.

‘Lotte Department Store Dongtan Branch’ and ‘Daejeon Shinsegae Art & Science,’ which opened sequentially in August last year, also rose to become regional landmarks within about six months of opening. Their common features include spacious flow lines and a mega food avenue (Lotte Department Store Dongtan Branch), and a science museum and observatory that families can enjoy together (Daejeon Shinsegae), offering abundant entertainment beyond shopping.

An industry insider said, "It is expected that full-scale overseas consumption will remain difficult this year due to the ongoing impact of COVID-19," adding, "They plan to put all their efforts into strengthening luxury lineups and providing interesting offline content to attract these customers to department stores."

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