Inside Shinsegae: The Korean department store with a golden boot


les grew by a robust 9.3 percent in the first half of 2022. Online sales grew slightly faster than sales in physical stores, partly, says the Ministry, because online grocery sales have become more mainstream. 

Of the store-based retailers, department stores enjoyed the fastest growth: 18.4 percent “with a steep rise across all categories”. 

A platform for sustained growth is coming from a source that many struggling department stores around the world — still depending on the loyalty of the ebbing boomer generation — would envy: Millennials and Generation Z. Consumers in these two groups have become major purchasers of luxury goods, which by extension makes them important customers for the high-end department store sector where Shinsegae plies its trade.

The contribution of high-end brands to Shinsegae’s growth is skyrocketing, with Gucci, Louis Vuitton, Hermes and Chanel among the names driving revenues and profits higher. Last summer, a Louis Vuitton pop-up occupied five levels of the Gangnam store in Seoul, which, not coincidentally, topped US$2 billion for the year to become the highest grossing department store in the world.  

Going forward, luxury brands should make a bigger contribution to Shinsegae’s revenue and earnings growth according to an analyst who covers the sector, Jiwon Lee of CGS-CIMB. Luxe is forecast to account for up to 60% of Shinsegae’s department store sales by 2024, a 50% rise from in share from the level in 2021.

In a recent report, Seoul-headquartered consultancy Samjong KPMG estimated that Korea’s luxury goods market expanded by almost 30% in 2021, to US$5.8 billion, and the expectation is for more double-digit percentage growth over the next couple of years. The hunger for foreign luxury brands have made the department stores that house them key beneficiaries.

In the back of the net

Within the luxury segment, the fashion category is particularly strong. But Shinsegae is also doing well at lower price points with some appealing collaborations, including one with Son Heung-min, star forward for Tottenham Hotspur in the English Premier League who chose Shinsegae as retail partner for his new fashion line, NOS7 (officially stands for: “Nothing, Ordinary Sunday” along with his Tottenham shirt number, or, if you prefer, his name spelled backwards and shirt number). The line launched with a pop-up on June 17 at Boon the Shop, a futuristic Shinsegae fashion emporium in Seoul, attracting a huge crowd that snapped up items as fast as they could, some of it quickly resold for a killing online.

It was the second time this year that Shinsegae had made a new foray into the sports-related area, having earlier launched a golfwear brand. Golfwear is a big deal in Korea, a country where participants in sports — even on casual Sunday afternoon outings — like to look the part and are prepared to spend heavily to keep up appearances.

Shinsegae’s second quarter: rock solid 

Shinsegae Department Stores had a fine second quarter with year-on-year sales growth of 25.5 percent. Online sales rose by 12.2 percent. The parent company, Shinsegae Inc., enjoyed an increase in net profit of nearly 400 percent.

The company attributed part of the stellar growth in apparel sales to people wanting to get out more as they became less fearful of the pandemic. Sales of women’s fashion rose by 34.2 percent year-over-year, men’s fashion was up 34.7 percent, and sports/outdoor wear rose 43.6 percent.

One aspect of Shinsegae’s retail business that had been struggling up through April was its three duty free shops in Seoul, Busan and Incheon. These are finally rebounding as international travel resumes.  Duty-free experienced sales growth of more than 45 percent in the second quarter, including 253 percent at the airport locations. But there is still a lot of upside, since foreign travel has still not recovered to anywhere near its pre-pandemic level and also because Chinese daigou sales are still at depressed levels in the wake of the lockdowns across the border in China.

Going mega

Shinsegae has ambitious expansion plans in addition to continued capital expenditure to keep its existing trophy department stores up to date. The company plans to invest 20 trillion won (US$14.4 billion) to update the store base, build a theme park, and improve its online business. (In 2021, Shinsegae acquired two e-commerce platforms, eBay Korea and W Concept, the latter a curated collection of independent designers that Shinsegae has now made omnichannel.)

The physical retail part of the investment includes what for some time there has been a competitive footrace between Shinsegae and Hyundai to build a ‘mega shopping mall’ in the southwestern city of Gwangju, population 1.5 million and currently under-retailed.

Shinsegae actually plans to build two, one of them a greenfield project called Starfield Gwangju that will include about 300 retail brands, a water park and an entertainment component housing cinema, sports and games.

The second project involves the expansion of an existing company department store in the city, which it intends to expand into a parking lot at the front of the building. The expansion, when complete, would increase the number of brands and boutiques in the store from 530 to more than one thousand, and add restaurants, art gallery, pet playground and rooftop park.

Plans for the me-too Shinsegae projects follow an announcement by Hyundai in July that it would construct a mega mall on a 310,000 square metre site in Gwangju.

The two projects will go a long way in helping Gwangju retail catch up with the other major cities in Korea. 



Source link

Comments are closed.