Even coolest commercial areas hit by pandemic downturn

Economy

Published: 18 Apr. 2022, 19:00 Updated: 18 Apr. 2022, 20:07

Even coolest commercial areas hit by pandemic downturn

Gangnam, Seoul, on Sunday as social distancing regulations are eased. [YONHAP]

Not even Gangnam, the hippest commercial district in the country, dodged the global pandemic.

Many of its stores were forced to close, while earnings dropped for those that survived.

According to a study by the Korea Agro-Fisheries & Food Trade Corporation (aT) released on Monday, the number of stores in the most popular area in the district declined 16.7 percent between 2019 and 2021.

In 2019 before Covid-19 hit Korea, the area had 419 restaurants. That number dropped to 392 in 2020 and to 349 last year.

As of January, 335 restaurants that were still open.

Earnings at these restaurants fell 45 percent over the past two years.

The total was 367.7 billion won ($300 million) in 2019, 244.8 billion in the first year of the pandemic and 201.9 billion won 2021.

The stores that were studied are those located at exit No. 11 and No. 12 at Gangnam subway station and exit No. 4 and 5 of Sinnonhyeon station.

Strict social distancing regulations, including a limit on the number of people that can eat together and business curfews, had a huge impact.

Many of the stores located on first floors, which is considered a prime real estate, are currently vacant.

"The area that aT studied is a commercial district that is sensitive to fads," Kim Young-gap, Hanyang Cyber University professor of hospitality management, said. "It is an area where there are trendy restaurants and as such has a huge inflow of young customers.

"It seems that even young people reduced their spending as they reacted sensitively to Covid-19."

While businesses struggled, the prices jumped.

The price of cup of Americano in the area increased 78.8 percent from 2,423 won in 2019 to 4,333 won in January this year.

Sushi is now 52.4 percent more expensive, as it went up from 10,192 won to 15,534 won during the same period.

Pizza prices are up 50.8 percent, while steak is now 49.1 percent more expensive.

The prices were affected not only by the increase in ingredient costs but also the increase in labor costs.

Higher prices may have hit business.

The agency in November released a study on eating trends.

The study looked into 15 major commercial districts across the country, including: Hongdae, Seoul; Seomyeon, Busan; Jungangno Station, Daegu; and Sangmu, Gwangju.

In comparing 2019 with June to October 2021, earnings in all but two areas declined.

In Hongdae, the number of stores declined 19 percent. Sales in Hongdae plummeted 73 percent from 654 billion won to 171.3 billion won during the same period.
The report noted that Hongdae is a commercial district that caters to a more diverse customer base than other commercial neighborhoods.

Restaurants, especially those that sell alcohol, were hit the most from social distancing.

One of the biggest changes as a result of the pandemic is that customers now emphasize hygiene.

In a study of 1,341 people 20 to 69 made between September and November last year, 92.1 percent said they consider hygiene as a key factor when picking a restaurant.

It ranks second to taste and quality, which chosen by 94.3 percent. Price was 86 percent, service 81.1 percent and reputation 80 percent.

In the same survey in 2019, taste was 71.6 percent, price 46.2 percent and convenience 38.4 percent.

Only 22.7 percent picked hygiene.

As the government has removed almost all social distancing restrictions, business in these areas is expected to rebound.

"Since the beginning of this year, as the government started relaxing regulations, sales in major commercial districts is showing signs of recovering," said Hanyang Cyber University professor Kim. "While business won't return to the pre-pandemic levels immediately, with more people coming out, spending is expected to increase."

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]