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Threat to democracy is threat to sales: Retail, hospitality face holiday slump

Published: 06 Dec. 2024, 18:48

CHO YONG-JUN
[email protected]

People take a photo of the Christmas tree outside Lotte Department Store in Jung District, central Seoul on Tuesday. [YONHAP]

December used to be a big month for retailers, but with the unfolding political turmoil following President Yoon Suk Yeol's martial law declaration, they now face cautious consumers and canceled reservations.

Some hotels have experienced an increase in cancellations after being flooded with calls worrying about the country's safety.

“Many of our customers, not Korean customers but our foreign customers, have been reaching out to us constantly regarding the current situation and whether Korea will be at war,” a Four Seasons Hotel representative told the Korea JoongAng Daily on Friday.

In terms of conference room reservations, the bookings were largely unaffected as corporate and governmental events are rare in December, according to the hotel.

It remains to be seen whether the current events will have a long-running, significant impact on the accommodation industry as other hotels such as The Shilla Seoul reported no major changes in reservations.

In the e-commerce realm, operators like Coupang, SSG and Market Kurly all saw increases in purchases of daily necessities. There were no notable disruptions in delivery times, however, as the martial law order was lifted in just six hours.

“We did experience increases in orders of basic necessities, but most were delivered after the martial law decree was lifted and we experienced no big issues [with distribution],” a representative of the e-commerce platform said.

Shinsegae Group reportedly had also held an emergency meeting on Wednesday morning to assess and discuss the expected impact across its subsidiaries. While there were no reports of Lotte Shopping and Hyundai Department Store holding emergency meetings, both companies had a few staff on standby to follow up on any updates.

The real problem, however, had only begun, as the current political crisis and the aftermath are expected to last a long time, and so will the ensuing public sentiment. This can result in a disruption in the warm holiday vibe of a season usually packed with meetups of friends and family — and holiday spending.

“The crisis caused by the martial law order seems now to be moving the political situation toward the impeachment [of Yoon],” a spokesperson from a major retailer said.

“Mass demonstrations like candlelight vigils or the instability of the political situation result in a decrease in consumption, and I think it would be difficult to expect an end-of-year boost in sales this year.”

End-of-year sale promotions and Christmas and holiday-related festivals have been regarded as the last chance for the retail industry to increase its revenue, but things remain murky as to whether the promotions can proceed as planned.

“There must be an impact on end-of-year revenue, negatively,” a spokesperson from a department store said. “Consumers would still buy things they absolutely need but wouldn’t necessarily buy presents or dine out at this rate.”

The duty-free industry is also on high alert, as the decrease in the value of the won, worsened by the political instability, causes the relative price competitiveness of duty-free products to decrease as they are priced in dollars, and not won.

"The industry wasn't performing well in the first place and now we have the political instability," a representative in the duty-free business said. "We will be monitoring the exchange rate and come up with countermeasures."

BY CHO YONG-JUN, JANG JOO-YOUNG [[email protected]]