Hwanghak-dong street market's lustre fades alongside self-employed's challenges

Economy

Published: 24 Jul. 2023, 18:13 Updated: 24 Jul. 2023, 18:48

Hwanghak-dong street market's lustre fades alongside self-employed's challenges

An empty kitchen street in Hwanghak-dong in central Seoul on July 17 [JIN MIN-JI]

The kitchen and furniture streets in Hwanghak-dong, central Seoul, were once must-visit locations for the self-employed planning to open cafes or restaurants.

Since their development in the1980s, around 400 merchants have settled to sell all sorts of kitchen equipment, including refrigerators and rice cookers, and furniture, including chairs and tables.

Offered at a steep discount, the market once used to pull in crowds hoping to buy kitchen equipment at a bargain before opening a new store. It was therefore seen as a barometer gauging the economy for the self-employed in Korea.

But its reputation has waned over the past years, with the weak economy discouraging people from opening new businesses and more options available online.

“Before the Covid-19 pandemic, the streets were so full of people that it was difficult for delivery trucks to move,” according to a middle-aged furniture seller on Hwanghak-dong furniture street who spoke on condition of anonymity. She has been in the business for 13 years.

“Even foreigners, from Japan, for example, used to buy furniture here. But now, I barely speak a word during the day and pack my lunch to save money. I have seen merchants taking antidepressant drugs.”

Kitchen equipment displayed outside a store in Hwanghak-dong kitchen street in central Seoul on July 17 [JIN MIN-JI]

Weaker economy

The two markets were developed alongside the rapid growth of the food service business in Korea.

They formed one of the largest second-hand markets in metropolitan areas, once responsible for supplying most of the kitchen equipment and furniture nationwide.

But the market's reputation has faded over recent years, as rapid interest rate increases and steep inflation discourage people from opening new businesses and force many to shut down their businesses.

“The present crisis is different from past ones,” according to a middle-aged kitchen equipment seller in Hwanghak-dong kitchen street, who has been in the business for 25 years.

“Sales boomed during the Asian Financial Crisis because many people were laid off and opened restaurants with their severance pay. But the unemployment compensation the young people receive these days is not enough to even open a gimbap store, which costs at least 120 million won ($94,000).”

It is a statement that the self-employed agree with.

“The current situation is very difficult,” a 31-year-old, who runs a wine bar in Songpa District, western Seoul, said.

“A lot of the self-employed that I know, including myself, are struggling due to the rising cost of raw materials and part-timers. So we are laying off part-timers and working at our stores, not to earn money but to save every penny and reduce the deficit.”

The interest rate set by the Bank of Korea (BOK) stands at 3.50 percent, a sharp increase from July 2021's figure of 0.50 percent. Core inflation, excluding volatile food and energy prices, remained high at 3.5 percent in June.

The total outstanding loans drawn out by the self-employed reached a record 1,033.7 trillion won in the first quarter, according to BOK data provided to a lawmaker on June 26.

The delinquency rate of the self-employed hit an eight-year high of 1 percent in the first quarter, up from 0.65 percent in the fourth quarter of last year.

“The fact that the credit rating of the self-employed generally is not high, and the government ending their financial support measures in September, make the delinquency rate a concern,” Lee Jeong-hwan, an associate professor at the College of Economics and Finance at Hanyang University, said.

“The business environment will likely improve after the third or the fourth quarter next year when the impact of the possible rate fall in the first half is reflected in the real economy.”

The number of newly opened restaurants and accommodations fell to 156,489 in 2022, down 15 percent from 2019, according to the Ministry of SMEs and Startups.

“I saw piles of kitchen equipment on the Hwanghak-dong kitchen street when I went there before I started a business,” said an owner of a traditional liquor bar in central Seoul, who opened the store this year.

“I could directly feel the struggles of the merchants when they did not want to buy the kitchen equipment I was trying to sell,” the owner added. “I ended up selling them on Danggeun Market,” an online second-hand marketplace.

The situation is a little better for merchants who entered exclusive partnerships with franchises.

“We raised 600 billion won in sales in the first half, an average figure, thanks to exclusive contracts to supply products to franchises when they open new stores,” a seller on the kitchen street said. “But you can never predict what will happen next month.”

Chairs displayed in front of a furniture street in Hwanghak-dong, central Seoul, on July 17 [JIN MIN-JI]

Declining presence of traditional markets

The growing popularity of online markets has also weakened the attractiveness of the kitchen street for young and tech-savvy startups.

Online transactions for second-hand goods jumped six-fold from 2008 to 24 trillion won in 2021, according to the Korea Internet & Security Agency.

“Some inexperienced online sellers put products up at a low price that cannot even cover the cost because they don't know how much they will be taxed later,” according to a merchant selling kitchen utensils on Hwanghak-dong Street.

“Customers who have checked the price come to our store and demand that price. Product prices are falling, but rental fees are rising along with inflation.”

Recent controversies about traditional markets charging excessive prices have also tainted the reputation of the traditional market in general.

A merchant at a traditional market in North Gyeongsang publicly apologized in June after they charged a whopping $55 for 150 grams of traditional snacks to celebrities who visited the store while filming the popular reality show “Two Days, One Night.”

“I charged the high price for snacks due to the difficulties caused by Covid-19,” he wrote in the letter.

A group of merchants from a traditional fish market in Incheon also apologized in June for selling legless crabs to a customer who wanted to buy live crabs and found out they were legless after leaving the market.

They apologized, promising to “win back customers' trust.”

“Traditional market sellers are trying to recoup the costs incurred from a rise in the policy rate, inflation, minimum wage and decreased spending,” Seok Byoung-hoon, an economics professor at Ewha Womans University, said.

Korea’s minimum wage for 2024 was raised by 2.5 percent to 9,860 won, an over 50 percent increase from 6,470 in 2017.

“They have to regain trust by, for example, adopting a fixed-price system, as well as providing differentiated products and services that are not available at the discount mart. The government also needs to educate merchants on online marketing instead of forcing discount stores to close biweekly” on Sunday, Seok added.

BY JIN MIN-JI [jin.minji@joongang.co.kr]