Gwangju Retail and Distribution Sector Sees Slight Uptick... Economic Recovery Remains Tepid

The retail and distribution industry in the Gwangju region has shown a slight increase. However, this uptick is attributed to the entry into the seasonal peak due to rising temperatures, expectations of a special demand from the June local elections, and the expansion of online and contactless consumption. As the index still remains below the baseline of 100, experts say it is premature to consider this a full-fledged economic recovery.

The Gwangju Chamber of Commerce and Industry announced on April 17 that, according to a survey of 47 retail and distribution companies in Gwangju on the "Retail Business Survey Index (RBSI) for the second quarter of 2026," the index recorded 87, which is a 5-point increase from the previous quarter’s score of 82.

Trend of the Wholesale and Retail Industry Business Outlook Index in Gwajuyeok. Provided by Gwangju Chamber of Commerce and Industry

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By category, the sales outlook index (rising from 76 to 86) rebounded due to positive factors such as increased outdoor activities and special demand from the elections. On the other hand, the profit outlook index (falling from 87 to 82) declined, despite expectations of improved sales, due to rising fixed costs including labor and utility expenses and the limitations in reducing costs. This indicates that the increase in sales is not sufficient to offset the rise in expenses, pointing to a continuing structural recession.

Expectations for recovery and concerns about structural issues coexisted by business type. Supermarkets (rising from 67 to 82) saw an increase in the index due to anticipated growth in foot traffic and demand for daily necessities as temperatures rose. However, intensified market competition resulting from the abolition of mandatory off-days for large discount stores and rising operational costs were cited as obstacles to recovery.

Large discount stores (remaining at 100) and department stores (remaining at 100) are expected to remain unchanged. For large discount stores, food-centered consumption is supporting sales, but recovery in demand is limited by high inflation. In department stores, the perceived business outlook varied among companies depending on store renovations and changes in brand line-ups. In contrast, convenience stores (falling from 71 to 65) are projected to experience worsening business conditions due to excessive competition between stores and the direct impact of rising labor and utility costs on operating expenses.

In terms of external conditions, geopolitical risks stemming from the Middle East have had a clear impact on the local distribution industry. The survey found that 59.6% of respondent companies felt burdened by rising purchase and logistics costs due to the Middle East conflict. The aftermath of the war, including increases in oil prices and exchange rates, is directly leading to higher raw material costs. However, due to sluggish consumption, companies are structurally limited in their ability to fully pass these costs on to selling prices, which is further intensifying management burdens.

Additionally, 66.0% of respondents (51.1% expected a contraction, 14.9% a significant contraction) predicted that prolonged Middle East risks would negatively affect sales. This is interpreted as a result of decreased real purchasing power due to high inflation and the rise in external uncertainties, which are causing psychological contraction among consumers.

When asked about anticipated difficulties in the second quarter, local retail and distribution companies most frequently cited weakening consumer sentiment and sluggish domestic demand (61.7%). This was followed by rising costs (46.8%), high inflation (36.2%), and intensified competition (23.4%), indicating that the deterioration in real operating profit due to the high-inflation, high-cost structure is becoming increasingly severe.

Chae Hwaseok, Executive Vice President of the Gwangju Chamber of Commerce and Industry, stated, "Although the business sentiment appears to be recovering slightly in the second quarter, the simultaneous rise in oil prices and exchange rates due to geopolitical risks from the Middle East is exerting strong cost pressures on the distribution industry," adding, "Along with pump-priming policies to stimulate consumer sentiment for a virtuous cycle in the local real economy, tailored management stabilization measures must be provided for retail and distribution businesses facing limits from prolonged high inflation and high interest rates."

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