Retail sector grapples with reduced internal sales, potentially impacting Q1 profits

Economic slowdown dampens retail sector's Q1 earnings, as both established and successful convenience stores witness a substantial drop in profits due to reduced domestic consumer spending.

, and Administrator

2025 May 14 . 5:28 AM

2 min read

Economic slowdown hits retail sector hard, causing a dip in domestic spending and a significant... — Economic slowdown hits retail sector hard, causing a dip in domestic spending and a significant decrease in operating profits for even once prosperous convenience stores during the initial quarter.

Retail sector grapples with reduced internal sales, potentially impacting Q1 profits

In the heart of Seoul, shoppers traverse bustling supermarkets on April 13. [YONHAP]

A Stagnant Consumer Landscape

The retail landscape in South Korea has been grappling with a prolonged struggle since the 1990s, as suggested by a study from the Korea Chamber of Commerce and Industry (KCCI). [1]

Political and Economic Headwinds

This lingering slump in domestic consumption can be traced to several contributors:

Demographic Factors: South Korea experiences an aging population, witnessing a surge in seniors and a concurrent decline in the youth labor force. [2] This demographic shift alters consumer spending patterns and labor force participation.
Economic Challenges: High levels of household debt and stagnant wages have impeded consumer spending, as people prioritize debt repayment. [1]
Global Economic Influences: South Korea's export-driven economy is susceptible to global economic recessions, which can weaken employment and income stability, thereby decreasing domestic consumption. [1]
Structural Changes: The evolving family structures, such as shrinking households and single-person households, impact overall consumption levels. [2]
Policy and External Factors: Monetary policy changes can affect borrowing costs and, consequently, consumer spending. Geopolitical tensions, such as periodic standoffs with North Korea, can also impact financial markets and consumer confidence. [1]

Pessimistic Business Sentiment

The business outlook for March remained subdued due to ongoing concerns over weak consumption and external risks. [1] As customers continue their wary steps through the supermarket aisles, South Korea grapples with the persistent challenge of reigniting its consumer spark.

[1] Korea JoongAng Daily[2] Statistics Korea[3] Bank of Korea[4] Ministry of Employment and Labor[5] Ministry of Strategy and Finance

The column on the retail landscape in South Korea suggests that the economy has been struggling due to factors such as an aging population, high household debt, and global economic influences.
The government's monetary policy changes can have a significant impact on consumer spending, affecting borrowing costs and, consequently, the overall economy.
The ongoing geopolitical tensions with North Korea not only pose a threat to regional stability but also impact financial markets and consumer confidence within South Korea.
The industry and business sectors are impacted by the slump in domestic consumption, with the March business outlook being subdued due to this and external risks.
Travel and tourism, which is closely linked to consumer spending, may also be affected as the stagnant economy and low confidence could potentially discourage tourists from visiting the country.