[The Editors' Verdict] Weak Distribution Competitiveness in the 'Discount Republic'

Lack of Killer Content Like Experience Events
Failing to Capture Consumers Who Step Outside Their Homes

Last weekend, when the first cold wave advisory of the year was issued, I was surprised when I went to a local public bathhouse. The waiting line for payment to enter the bathhouse extended all the way outside the door. A tent was even set up in front of the bathhouse entrance to protect customers from the severe cold. During the COVID-19 pandemic, the bathhouse had been quiet, but since the transition to an endemic (periodic outbreak of infectious diseases) last year, the number of customers has gradually increased, and recently, it is said to be crowded every weekend. This is a scene that could not be seen before the COVID-19 pandemic. Among the waiting line that day, people in their 20s and 30s, who appeared to be couples, stood out. Young people who have emerged from the long tunnel of COVID-19 seemed to have flocked to the warm jjimjilbang (Korean sauna) due to the cold wave.

In fact, offline consumption has explosively increased since the easing of COVID-19 restrictions. According to the Ministry of Trade, Industry and Energy's survey of major retailers' sales, offline sales shrank by 3.6% in 2020 when COVID-19 hit hard, then rebounded by 7.5% the following year, and surged by 8.9% in 2022, showing a recovery trend. On the other hand, the growth rate of online sales slowed down from 18.4% in 2020 to 15.7% in 2021 and 9.5% in 2022.

However, statistics from last year show a somewhat different atmosphere. The offline sales growth rate in the first half of last year fell to 4.5%. During this period, online sales also decreased by 7.3%, but the proportion of online sales in total sales has been increasing. The share of online sales was maintained at 48.4% in 2021 and 48.6% in 2022, but expanded to 49.8% in the first half of last year. As of November last year, the online sales share jumped to 53.7%. This means that the surge in offline demand after the transition to the COVID-19 endemic was not absorbed by store sales.

Major domestic offline retailers have launched large-scale discount events since the beginning of the year. This was a strategy to ignite the sluggish consumer sentiment that has continued since last year. At the government level, discount events to promote consumption were also planned. On the 11th, Yoo In-chon, Minister of Culture, Sports and Tourism, held the opening ceremony of the '2024 Korea Grand Sale,' the first event of the '2024 Visit Korea Year,' with Lee Boo-jin, President of Hotel Shilla and chairperson of the Visit Korea Year committee. Until the 29th of next month, retailers, airlines, and accommodation providers are offering large-scale price reductions to attract foreign tourists and promote consumption. The government plans to lay the foundation for achieving 20 million foreign tourists this year through this event.

The government and retail companies also held a large-scale discount event called 'Korea Sale Festa' in November last year. Modeled after the U.S. Black Friday, the Korean version of Black Friday has been held annually since 2015 as the 'National Representative Shopping Festival of Korea' (organizer's slogan). Retail companies also expanded consumption through discount events at the end of last year when gift demand was high.

However, frequent price discount events throughout the year will not keep consumers and foreign tourists who have come out of their homes stuck in offline stores. They need to have competitiveness that attracts customers to offline stores, including various experiential events that consumers can enjoy. At least local jjimjilbangs have a killing point of 'nostalgia,' such as cool sikhye (sweet rice drink) and boiled eggs.

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