Retail Industry Sentiment Index Rises for 2 Consecutive Quarters... Consumer Recovery 'Not Yet'

KCCI, RBSI 64→73→77
Continued Uncertainty in Economic Recovery Keeps Index Below Benchmark

The Retail Business Sentiment Index (RBSI) for the retail distribution industry rose for two consecutive quarters but remained well below the baseline (100), indicating that expectations for economic recovery are still low.

The Korea Chamber of Commerce and Industry announced on the 9th that the RBSI for the third quarter, surveyed among 500 retail distribution companies, was recorded at '77.'

The RBSI is an index that reflects companies' perceptions and forecasts of the business climate in the distribution sector. A value above 100 means that more companies view the retail business climate for the next quarter positively compared to the previous quarter, while a value below 100 indicates the opposite.

The Korea Chamber of Commerce and Industry explained, "As the rise in interest rates and inflation slows down and the peak vacation season begins, expectations for the retail market are gradually reviving." However, it analyzed, "Due to already high interest rates and inflation levels, household consumption capacity has weakened, so it will take time for consumption to recover."

In order: Large Discount Stores (93), Convenience Stores (86), Department Stores (79), Supermarkets (71), Online Shopping (71)

All sectors remained below the baseline (100), with large discount stores showing the highest outlook at 93 (up from 87). Convenience stores (80→86), supermarkets (58→71), and online shopping (66→71) also showed relatively increased expectations for economic recovery, whereas department stores (94→79) were the only sector to lower their expectations.

Large discount stores recorded '93,' the highest among the sectors. Despite the increased burden on household budgets due to weakened consumption capacity, it is difficult to reduce consumption of essential goods like groceries. Additionally, high inflation has led to reduced dining out and increased demand for home-cooked meals. Furthermore, the effects of store renovations through food offerings and experiential spaces prepared since the COVID-19 period are becoming visible.

Convenience stores (86) are expected to perform strongly during the peak season, with increased outdoor activities and higher sales of ice cream, beverages, and alcoholic drinks. Sales of processed foods such as lunch boxes have also risen due to high inflation. However, the 5% increase in the minimum wage compared to last year is expected to limit the rise in the outlook.

Department stores recorded '79,' the only sector to see a decline in expectations. The resumption of overseas travel due to the endemic has slowed luxury goods sales, which had driven department store growth. Additionally, restrictions on group tours by Chinese tourists to Korea have had a negative impact. According to sales trends of major distribution companies reported by the Ministry of Trade, Industry and Energy, recent sales growth rates have declined, and the number of purchases has also turned downward.

Supermarkets (71) showed a slight improvement in outlook due to increased demand for home-cooked meals amid high inflation, boosting sales of their main product category, food. Expectations also rose due to the effects of enhanced delivery services and private brand products, which have been carefully developed. However, intensified competition with online shopping, large discount stores, and convenience stores keeps economic expectations low.

Online shopping (71) has seen a slowdown in sales growth as face-to-face consumption has increased since COVID-19. According to sales trend statistics of major distribution companies, quarterly sales growth rates have dropped from double digits to single digits. In response, e-commerce companies are expected to seek new opportunities by strengthening service product lines related to travel, culture, and leisure, aligned with increased outdoor activities due to the endemic.

Key Strategies … Cost Reduction, Profit Improvement, Strengthening Online Channels in Order

The current or prioritized management strategies include cost reduction (56.2%), profit improvement (32.6%), strengthening online channels (26.6%), enhancing promotions (18.8%), and reinforcing offline operations (12.8%), in that order.

Jang Geun-mu, Director of the Korea Chamber of Commerce and Industry’s Distribution and Logistics Promotion Institute, emphasized, "As daily life gradually returns to normal with the endemic, the value of offline distribution, which online distribution cannot replace, is gaining renewed attention." He added, "(Offline distribution) is becoming increasingly important to create unique experiences that customers can enjoy and have fun with in stores, making consumers want to revisit those spaces."

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