Department Store Layouts Reflect Changing Economy

      April 06, 2013 08:19

      When the Hyundai Department Store in Samseong-dong re-opened in October last year after a face-lift, there was a brand-new Godiva chocolate store on the first floor with tables and chairs in front. "We invited Godiva to set up a store because we wanted to bring more young customers in and get them to spend more time there," a staffer said.

      It seems to have worked, since an average of 700 people visit the Belgian chocolate shop every day. But it was an unusual move. The food and beverage section is usually on the basement level of department stores, while the first floors are reserved for luxury fashion and cosmetics to attract female customers. But now the layouts are changing.

      The prolonged economic slump has crimped spending on expensive products by middle-class consumers, and widening income disparity has caused department stores to set up separate space for luxury brands.

      The first floors of department stores are a kind of barometer of private consumption, because their sales reflect wider spending trends and the economic mood. Since they play such a key role in attracting customers, they tend to be more sensitive to economic conditions than other floors.

      People queue up at the Godiva chocolate shop at Hyundai Department Store in Samseong-dong, Seoul. /Courtesy of Hyundai Department Store

      In the 1960s, when Korea's rapid economic development started, the first floor of the Shinsegae Department Store downtown Seoul was full of shops selling cameras, radios, watches and jewelry along with musical instruments, soap and toothpaste. "At that time, the main customers were very wealthy people, so many expensive products like imported home appliances were displayed on the first floor," says Bae Bong-kyun from the Shinsegae Museum of Korean Commercial History.

      In the 1970s, the first floors had exchange booths and stores catering to foreigners because the number of foreigners visiting Korea surpassed 1 million, leading to an influx of foreign currency.

      In 1979, the Lotte Department Store opened downtown Seoul not too far from Shinsegae. Its first floor was taken up by stores selling fashion accessories like handbags, wallets, shoes, jewelry, sunglasses, socks and umbrellas, prompting Shinsegae to adopt a similar format.

      It was in the late 1990s that foreign luxury brands started taking over, starting with Louis Vuitton store at Shinsegae in 1995. Another Louis Vuitton shop opened at Hyundai Department Store in the affluent Apgujeong-dong in Gangnam in 1997, followed by a Chanel store at Lotte. This development reflected the pre-crash boom, as Korea’s per-capital national income surpassed US$10,000 for the first time and more Koreans traveled abroad.

      The high-end consumer group grew in the 2000s, attracting Prada, Chaumet, Piaget and other luxury brands to department stores. But now the recession has weakened the purchasing power of middle-class Koreans. Department stores are either opening separate wings dedicated to luxury goods or leaving only the best-selling brands on the first floor while moving others up to the second floor.

      "For instance, in cosmetics, mid-priced brands such as Kiehl's and Benefit that cater to younger consumers started to occupy the first floors," said Bae at the Shinsegae Museum. Perfume and candle shops, which are also frequented by young people, are now on the first floors, while the jewelry section has moved to the basement.

      "As the economic slump continues, the top priority is to get people to come inside," said Kim Hyung-joon, the head of marketing at one department store.

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