December 01, 2016 12:15
Private spending is slowing down drastically amid a massive influence-peddling scandal involving the president and tougher curbs on propitiatory gifts for influential people.
"In previous years, spending by wealthy customers was not impacted by slow economic conditions, but nobody is spending money this year," a staffer at a major department store said.
Average sales at Lotte Department Store last weekend fell 4.7 percent compared to the same period of last year. The situation was even worse at its flagship store in downtown Seoul, where sales dropped eight percent.
A Lotte staffer said, "November is a very important period leading up to the peak year-end shopping season, but we are experiencing a steep decline in sales. We're handing out more freebies and prizes and offering bigger discounts, but the outlook is gloomy."
Shinsegae and Hyundai department stores face the same problems, with average sales declining between two to four percent last weekend.
Depressed consumer sentiment is spreading throughout the economy. The streets of Seoul's Myeong-dong shopping district, which bustled with Chinese tourists during China's national holiday week last month, have gone quiet.
The decline in tourists compounded by weak private spending is shutting down stores. Out of around 30 cosmetics and accessories stores in Myeong-dong, four have already closed, and several other shops have "for rent" signs in their windows.
TV home shopping companies are also feeling the crunch. Live news coverage of the massive candlelight demonstrations downtown on weekend evenings, which is prime time for home shopping broadcasters, have resulted in sharp drops in orders.
According to the Bank of Korea last week, the consumer sentiment index for November stood at 95.8, down 6.1 points compared to October and well into pessimistic territory. That was the lowest level since April of 2009, just after the onset of the global financial crisis.
"The bleak situation is likely to continue because people in their 40s, who are the strongest consumer group, are seeing incomes shrink and the country is suffering uncertainty and instability amid the corruption scandal," said Joo Won at Hyundai Research Institute.
And Shin Min-young at LG Economic Research Institute said, "If we want to turn things around and spark a recovery in consumption, the government and private businesses need to pool their strengths and come up with radical steps to spur spending."
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