Spending Disparity Deepens

The coronavirus pandemic has widened the disparity in spending between rich and poor.

The pandemic did not have a huge financial impact on higher-paid office workers who can still make a living telecommuting, but people who work in lower-paying service-sector jobs were hit hard. The better-off therefore had more disposable income and often bought luxury goods and services to compensate for their inability to travel abroad, while low-income earners had to cut back on spending and buy cheap if at all.

The Hyundai Department Store in Pangyo south of Seoul saw revenue soar 9.4 percent in 2020, the highest among all branches because Pangyo is home to the headquarters of IT companies like Naver and Kakao and computer game developers. Sales of precious stones in the mall soared 50 percent and of watches 25.9 percent.

But at the branch in the southern industrial city of Ulsan, sales fell 15.1 percent and in the central region branch in Cheongju, North Chungcheong Province 11.3 percent.

The main beneficiaries were luxury labels like Chanel, Hermès and Louis Vuitton, all of which posted double-digit growth in Korea last year. Louis Vuitton’s sales rose 33.4 percent to surpass W1 trillion (US$1=W1,129).

Mid to low-priced apparel brands on the other hand were hit hard. Zara's sales plunged 26.5 percent to W305.6 billion. But businesses selling cheap products did well, with big-box retail store E-Mart Traders seeing sales surge 23.9 percent.

Leading brands that boast strong recognition have thrived in lockdown as consumers have tended to stick to tried and tested products. New product releases slowed to a trickle, while taste tests or other offline marketing campaigns practically disappeared.

CJ Olive Young, the No. 1 retailer of health and beauty products, opened 13 new stores last year, whereas GS Retail's Lalavla and Lotte Shopping's LOHB's, ranked second and third, shut down 16 and 28 stores.

A similar trend has been seen among global brands. The world's top players grew even more in the pandemic due to their agility and sufficient cash to respond to a changing business environment. For instance, reduced outdoor activities depressed sales at sportswear brands Adidas and Under Armour, but No. 1 player Nike enjoyed remarkable growth thanks to its shift to online sales.