Cold First Quarter... Retail Industry Experiences 10 Consecutive Quarters of "Negative Perceived Economy"

KCCI's 'Retail Industry Business Outlook Index'
Below 100 Indicates Negative Sentiment... Q1 at 79

Retail distribution companies are expected to see a contraction in the economy in the first quarter. According to the business outlook index survey, the index has been 'negative' for 10 consecutive quarters from the fourth quarter of 2021 through the first quarter of this year.

On the 10th, the Korea Chamber of Commerce and Industry announced that the Retail Business Survey Index (RBSI) for the first quarter was recorded at 79. A value of 100 or above indicates a positive outlook for the next quarter, while below 100 indicates the opposite.

The first quarter figure dropped by 4 points (p) from 83 in the fourth quarter of last year. It has remained below 100 for 10 consecutive quarters since the fourth quarter of 2021 (99). After falling to 64 in the first quarter of last year, the index showed an upward trend for three consecutive quarters but reversed to a decline in the first quarter.

The Korea Chamber of Commerce and Industry analyzed, "The trend of high inflation and high interest rates continues, increasing the burden of household debt," and added, "Due to the impact of high interest rates, uncertainties in asset values such as real estate project financing (PF), stocks, and housing have increased, negatively affecting the recovery of the consumer market."

On November 14 last year, a citizen visiting a large supermarket in Seoul is selecting milk. Photo by Jinhyung Kang aymsdream@

Department stores and supermarkets showed signs of recovery, while convenience stores, large discount stores, and online shopping experienced sluggishness. Department stores rose 9 points from 88 in the fourth quarter of last year to 97 in the first quarter. Supermarkets also increased from 67 to 77. Convenience stores (80→65), large discount stores (88→85), and online shopping (86→78) declined.

Regarding the strong performance of department stores, the Korea Chamber of Commerce and Industry stated, "Strengthening premium products has resulted in less fluctuation even during recessions and enhanced management of VIP customers who contribute significantly to sales," adding, "The influx of the MZ generation through pop-up stores and increased sales from foreign tourists have raised expectations."

Supermarkets placed their hopes on the trend of increasing single- and two-person households, which is expanding small-quantity purchases and local consumption.

Retail Business Sentiment Index (RBSI) Trend. [Source=KCCI]

Convenience stores expressed concerns about the off-season effect in the first quarter when foot traffic decreases. Large discount stores viewed their position as narrowing amid high inflation and the rise of non-face-to-face consumption. Online shopping feels a sense of crisis due to Chinese e-commerce companies expanding their domestic presence by promoting ultra-low-priced products.

Retail distribution companies cited cost reduction (52.8%), strengthening online channels (29.8%), strengthening offline channels (19.6%), and developing differentiated products (18.2%) as their management strategies for this year. Management difficulties included increased costs (36.4%), sustained high inflation (21.4%), intensified market competition (14.2%), and continued high interest rates (10.2%).

Kim Min-seok, head of the Distribution and Logistics Policy Team at the Korea Chamber of Commerce and Industry, said, "The high interest rate and high inflation situation will continue this year, making it difficult to resolve domestic and international uncertainties in the short term," and added, "Rather than waiting for the consumer market to recover, it is important to respond proactively by preparing digital transformation and strategies to cope with a low-growth period."

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