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Consumer sentiment slumps after ferry disaster

Posted May. 07, 2014 05:42,   


Have the golden May holidays revived consumer sentiment that cooled following the tragic sinking of ferry Sewol? According to survey on business conditions of the retail and travel businesses conducted by the Dong-A Ilbo for the first five days of the month, consumption stayed sluggish in most businesses, while sectors related to daily living showed signs of recovery.

Three major department stores showed lower-than-expected sales. Lotte Department Store saw sales rise 2.7 percent year-on-year (excluding new stores opened since June last year). Sales at Hyundai Department Store and Shinsegae Department Store edged up by just 2.2 percent and 0.7 percent, respectively. A source at Lotte said, "In the past, when holidays lasted for more than four days, sales had grown more than 10 percent year-on-year."

The home shopping business is no exception. GS Shop focused on marketing this year`s May holidays by giving out more free gifts, but sales increased by only 0.2 percent compared to a year ago. CJ O Shopping saw sales drop by 0.3 percent. Lim Chae-woon, professor of business administration at Sogang University, said, "The mood formed among consumers to refrain from spending following the Sewol ferry tragedy, which resulted in less-than-expected sales."

Inbound travel businesses enjoyed sales increases as the ferry sinking had limited impact on inbound travelers. Sales at hotels and duty free shops sharply increased during the Labor Day holiday (May 1-3) due to large Chinese tourists. Stores at Myeongdong in central Seoul were full of Chinese tourists.

Chinese travelers also increased their spending. Sales at Shilla Duty Free shop increased 54 percent compared to the same period a year ago. The Korea Tourism Organization estimated that 68,000 Chinese people visited Korea from April 30 through May 4, a 34.3 percent increase year-on-year.

Sales at large retail stores showed sales recovery this holiday season. Sales at Emart rose by 15.5 percent, and those at Lotte Mart increased 11.3 percent. This can be interpreted that family trips and outdoor activities have increased and spending for daily lives have entered recovery.