Nervous consumers cut back on the very basics
At an underwear shop in Eungam-dong, northern Seoul, last Sunday, the 46-year-old owner, Mr. Yoo, said only three male customers came in all day, the first time in 20 years that sales have been so slow.
“My shop was one of the outlets with the highest sales around town, seeing 50 million won in sales every month,” Yoo said. “But the situation has been lousy since last October.”
Economic uncertainty has slammed the breaks on domestic consumption, and not just in underwear.
“The vicious circle of individuals ceasing spending and local companies losing power to develop new products due to sluggish sales has started,” said Lim Hee-jeong, head of the real economy division at Hyundai Economic Research Institute.
“Japan fell into chronic deflation after the asset bubble burst and the government failed to revive consumption, even after handing out gift certificates to people in the late 1990s,” said Choi Gwang, economics professor at the Hankuk University of Foreign Studies. “If Korea does not come up with a better reaction, sluggish investment and the vanishing of consumption will be prolonged.”
Weakness in consumer sales can be seen in many areas, especially the most basic. According to online shopping mall GMarket, sales of secondhand underwear increased 24 percent compared to last year.
Other used products have also seen sales growth this year. Sales of used suitcases surged 747 percent, secondhand earrings shot up 720 percent, used mobile phones soared 583 percent and educational toys went up 169 percent.
“I had never bought used products because it feels unpleasant, but when I saw the half-price tag on a secondhand mobile phone, I decided to purchase it,” said Lee Jeong-mi, a 31-year-old office worker.
Joongo Nara, or Secondhand Country, is an online secondhand commerce site. Its members now surpass 10.2 million people.
“On weekends, about 200 customers flock to each of our stores,” said Kim Tae-soo, general manager at Remarket, a secondhand chain with four outlets in Seoul and Gyeonggi.
The confectionery industry is feeling the consumption downturn. Lotte Confectionery, the largest company in the industry, saw its operating profit shrink 23 percent on year during the first three quarters of last year.
“No matter how bad the economy is, people usually buy confectioneries,” said a spokesman. “But now, consumers are even saving money on snacks.”
Sales of kids clothes at a department store are slumping.
“Children’s clothes were an exception in economic recessions, but parents who cutting their spending on their children are doing so,” said a sales clerk at the store.
“I used to buy luxury clothes at department stores for my 4-year-old twins,” said Mrs. Jeong, a 42-year-old office worker, “but since last year I stopped as I found it difficult to even afford day care centers.”
The consumption slowdown has stopped large retailers from opening new stores, which didn’t happen in the hard times of the late 1990s or after the global financial crisis of 2008.
This is the first year since 1996 when no new store will open.
“Due to the falling prices of real estate, even the top 10 percent high-income group, the main customers of department stores, have stopped shopping,” said a spokesman at a department store.
People are doing more things on their own to save money.
Kim Mi-jeong, a 32-year-old housewife, brought her daughter to a photo studio for her first birthday in 2009 and spent 1 million won for portraits. This year, she’s only going to spend 300,000 won at a studio where you take your own photos.
Another housewife surnamed Lee recently started buying a brand of tampon that’s 30 percent cheaper than her usual brand. Lee said she couldn’t stop buying tampons but could spend less.
By Choi Ji-young, Kim Young-min [firstname.lastname@example.org]