Retailers slash prices to soften MERS blow

South Korea’s major retailers are holding massive events in a bid to rekindle sales and vitalize consumer sentiment, which was seriously hit by the outbreak of the Middle East respiratory syndrome between late May and early July.


 

Department stores and discount outlet chains are slashing prices of luxury and fashion items to clear out their inventory while duty-free stores are offering free gifts to win back foreign tourists.

Lotte Department Store, the country’s largest department store chain, kicked off a massive sale event, dubbed the Lotte Black Super Show, at KINTEX in Ilsan, Gyeonggi Province, from July 23-26.

“During the first three days of the event, accumulated sales surpassed 8.5 billion won ($7.2 million) which is much higher than the company’s sales goal of 6 billion won for four days,” said a Lotte official, adding that more than 640,000 people have visited the discounting event as of Saturday.

The move comes after combined sales at the country’s major department stores -- Hyundai, Lotte and Shinsegae -- fell 10.7 percent in June from a year earlier, as both domestic and overseas shoppers canceled trips to the country and at its public venues with large crowds over MERS fears. The MERS virus has claimed 36 lives and pummeled private spending here.

According to the Bank of Korea, the consumer composite sentiment index in June slipped to its lowest to 99 in 30 months from 105 in May. In July, the CCSI inched up to 100 but still shows weak signs of recovery.

A reading above 100 indicates that consumers who expect economic and living conditions to improve in the coming month outnumber those who expect them to worsen.

Hyundai Department Store is also running sale events for luxury brands at its key branches, while Shinsegae Department Store has pushed up its annual sale to target shoppers going on summer holidays or those shopping directly from overseas retailers.

Duty-free stores which suffered a 30 to 50 percent drop in sales during the outbreak are also offering sales and promotions to rekindle Chinese tourists’ love affair with luxury brands.

Market leader Lotte Duty Free is selling luxury handbags and accessories of some 30 brands at reduced prices, while its smaller rival, Shilla Duty Free, is giving out special gift packages to Chinese shoppers, which include transportation cards, Wi-Fi coupons and selfie sticks. The company is also paying taxi fees for Chinese tourists who visit its Seoul store, according to Shilla Duty Free.

Last week, BOK Gov. Lee Ju-yeol said the number of foreign tourists dropped 53 percent on-year in June to some 520,000 people as tourism revenue also decreased $630 million.

“It seems hard for the tourism industry to recover entirely from the impact of MERS although July and August are a peak season for them,” he said.

By Park Han-na (hnpark@heraldcorp.com)