March 24, 2016 11:20
Shinsegae Department Store is reaping the fruits of remodeling its mall in the affluent Gangnam area of southern Seoul.
The store's revenues rose 42.2 percent on-year in the four weeks since it reopened in late February, and 23 percent of customers who shopped there were first-time visitors.
The sales boom is rare at a time when department stores overall are facing stalled growth due to a slow economy and a surge in online shopping.
Shinsegae's own growth wallowed below one percent for two years, but now it expects a 10 percent uptick this year, thanks not only to the remodeled Gangnam store but new stores in Busan, Gimhae (opening in June), Hanam (opening in September) and Daegu (opening in December).
The conglomerate spent W150 billion since September 2014 to expand the area of the Gangnam store by 56 percent (US$1=W1,163). It also redesigned the floor space to make it stand out among other department stores in the country. Booths were previously divided by brands, but now shopping space is separated according to products and themes.
It also set up coffee shops and rest areas on all floors.
Critics wonder whether the hefty investments will pay off in the long run. "The expansion of the Gangnam store is highly likely to pay off, but it costs W400-500 billion to open a new department store in the provinces, which means it will take a decade to break even considering operating margins between six and seven percent," one industry insider said. "In a recession such hefty investments often fail."
But Shinsegae sees things differently, saying only bold investments can overcome the slump. Company vice president Park Chan-young said, "Not only is it crucial for retailers to find good spots to market products, but we will see consumers spending more time in big shopping malls as a pastime rather than merely to shop."
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