"Only the Top 1% Winning Big in Stocks Smile... '300 Million Won Splurges' or '10-Won Wars,' the Middle Disappears [K-Shaped Consumption Era]①"

"If you place an order now, the wait time will be around 50 minutes."

On the afternoon of April 13, at House of Shinsegae Cheongdam in Gangnam-gu, Seoul, the food and beverage (F&B) brand 'Twelve' still had dozens of customers waiting, even though the lunchtime rush had long passed. The price for a single smoothie, the signature menu item, was well over 20,000 won, but there were no customers turning away. People were seen holding their drinks, taking certification photos with their smartphones, or glancing at their queue tickets and accepting the wait.

That same day, the CU convenience store located at the headquarters of BGF Retail in Samseong-dong, Seoul, was crowded with customers eager to buy a 3,000-won smoothie from a vending machine. This smoothie, made by placing frozen fruit into the vending machine and completed in just one minute, has become explosively popular as a value-for-money beverage since its debut last June. Yoo, an office worker in his 30s, said, "I really enjoyed smoothies from vending machines during my trip to Japan, so I even searched for a convenience store smoothie map in Korea," adding, "Twelve is just too expensive for me to wait in line for."

Number of people waiting at the CU convenience store smoothie vending machine. Provided by BGF Retail.

원본보기 아이콘

The 'K-shaped consumption' trend is becoming entrenched in Korea's domestic market. Since the second half of last year, the stock market boom has led high-net-worth individuals to increase their spending, while demand for ultra-low-priced and discount items has also surged-a striking polarization of consumption. Analysts point out that the middle class, which has long supported the domestic market, is losing influence as the main driver of consumption, raising concerns that this could lead to a sharp contraction in spending if economic volatility increases in the future.

According to the Ministry of Trade, Industry and Energy's "2025 Key Retail Sales Trends" released on April 21, major domestic department stores have posted growth for eight consecutive months from July last year through February this year. Department stores recorded a 4.3% annual increase in sales last year, marking the highest growth rate among offline retailers. Despite recent concerns about a slowdown due to rapid online market growth, the department store sector achieved record-high results thanks to a surge in luxury goods sales.

Indeed, the so-called "EruSha"-referring to Herm?s, Louis Vuitton, and Chanel-set new records last year. Herm?s Korea surpassed 1 trillion won in annual sales for the first time, reaching 1.125 trillion won, up 16.68% from the previous year. During the same period, Louis Vuitton Korea posted 1.8542 trillion won in sales, nearing the 2 trillion won mark just six years after first surpassing 1 trillion won in 2020. Chanel Korea also exceeded 2 trillion won in sales last year, reaching 2.0125 trillion won.

These luxury brands operate exclusively through department stores and duty-free shops in Korea. In particular, department stores rely heavily on VIP customers-defined as those spending over 5 million won annually at Shinsegae, 10 million won at Lotte, or 30 million won at Hyundai-as their core clientele, and have maintained robust demand despite several luxury price hikes in recent years.

원본보기 아이콘

As a result, the share of VIP sales at Lotte, Shinsegae, and Hyundai department stores has risen sharply. At Lotte Department Store, the proportion increased from 31% in 2023 to 45% in 2024, and reached 46% last year. During the same period, Shinsegae Department Store's VIP sales share rose from 44.1% to 47%, while Hyundai Department Store's grew from 41% to 46%. For Shinsegae Department Store, only the top 999 customers receive the highest VIP grade, "Trinity," and their average annual spending reportedly ranged from 200 million to 300 million won last year-more than double the "Black Diamond" tier's 120 million won average.

The department store industry continued to see strong results in the first quarter of this year, especially with robust sales of luxury jewelry brands. According to Lotte Department Store, sales of luxury jewelry in the first quarter jumped 55% year-on-year, while imported luxury goods also saw growth of up to 30%. Shinsegae Department Store and Hyundai Department Store also posted increases of over 50% in luxury jewelry sales, with Shinsegae's first-quarter sales forecast to reach 557.1 billion won, a double-digit (12%) increase.

On February 24, 2025, a customer visiting Daiso Emart Mokdong Store in Yangcheon-gu, Seoul is looking at cosmetics. Photo by Jinhyung Kang.

원본보기 아이콘

Ultra-low-priced products are also flying off the shelves. Daiso, the fixed-price household goods chain, posted sales of over 4.5 trillion won last year. Daiso, which offers items ranging from 500 won to under 5,000 won, has expanded its product range to include cosmetics and fashion items with overwhelming value-for-money in recent years, breaking its own sales records every year. Last year, Daiso reported an operating profit of 442.4 billion won and an operating margin of 9.7%, about three times higher than the traditional retail giants' average margin of 3%.

Another leading discount brand, Uniqlo, also showed clear growth. Uniqlo posted sales of 1.3524 trillion won last year, up about 27.5% from the previous year's 1.0602 trillion won. After its results were dampened by the "No Japan" movement, Uniqlo rebounded to over 1 trillion won in 2024, marking two years of consecutive growth.

Industry watchers say these companies have become the main beneficiaries during the downturn, as value-for-money consumption became the norm in Korea after the COVID-19 pandemic and amid inflation. This is also true for cross-border commerce (C-commerce) companies such as Aliexpress and Temu, which have targeted the Korean market with "ultra-ultra-low price" value. According to Wiseapp Retail, as of last month, Aliexpress (8.69 million) and Temu (8.17 million) ranked second and third in monthly active users (MAU) among domestic e-commerce platforms, following Coupang (33.44 million). These C-commerce platforms have seen a surge in users since 2023, surpassing local e-commerce players to remain at the top since before COVID-19.

원본보기 아이콘

The value-for-money consumption trend is also evident at big-box retailers. Fierce price competition has become the norm, with demand for ultra-low-priced goods becoming concentrated. Major hypermarkets have engaged in price wars, offering pork belly at 990 won per 100g, or countering competitors by lowering prices by another 100 won to 880 won. Amid this, consumers are restricting their purchases to promotional items and essential groceries. A large retailer representative said, "Average spending per customer is declining, and the focus on discount products has become more pronounced. Despite repeated ultra-low-price promotions, overall consumption isn't spreading."

This extreme polarization in spending is being exacerbated by the widening gap between capital and labor, as well as a sharp rise in asset inequality driven by the recent stock market boom. As liquidity has concentrated in the top asset brackets-evidenced by the KOSPI hitting record highs-those benefiting have ramped up luxury spending, while others have tightened their belts due to the burden of high living costs.

원본보기 아이콘

Jung Yongtaek, a researcher at IBK Investment & Securities, said, "The simultaneous asset market boom and consumption slump are rooted in the widening gap between capital and labor. As liquidity flows into the asset market rather than the real economy, asset prices rise, but the majority of consumers feel their economic situation is worsening."

원본보기 아이콘

He continued, "During periods of widening inequality, asset prices such as stocks often rise, but the burden on those with limited spending power accumulates, potentially weakening the sustainability of overall economic growth. The current 'recession within a boom' could be a sign of a turning point in the economic cycle." In other words, although the brisk sales of luxury brands and ultra-value products may give the impression of a boom, this extreme polarization in consumption could be an early warning sign of a recession.

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.