Editor’s Note
This analysis highlights a key trend in retail: while overall department store transactions declined in March, the average purchase price increased. This suggests a strategic pivot toward high-end merchandise, with luxury categories like watches and jewelry helping to buoy performance amid broader consumer caution. The industry’s focus on premium offerings may define its trajectory for the remainder of the year.
Investment in high-priced categories expected to drive consumer sentiment in the second half.
Department stores are going all-in on a high-end strategy despite the slowdown in consumption. The shift of consumption focus to ultra-high-priced products like watches and jewelry is helping to offset the sluggishness.
According to the Electronic Disclosure System on the 26th, the first-quarter performance of major domestic department stores generally showed a slight decrease compared to the same period last year. However, the luxury watch and high jewelry segments were exceptions, recording high growth rates.
According to the Ministry of Trade, Industry and Energy, the number of department store purchases in March decreased by 6.5% year-on-year, but the average purchase price increased by 4.7%. For Shinsegae Department Store, cumulative sales of luxury jewelry from January to March this year increased by 29% compared to the same period last year. During the same period, Hyundai Department Store also saw sales of watches and jewelry jump by 43% year-on-year.
The industry believes that investment in differentiated high-priced categories could be a breakthrough for the department store business model, even amid an economic downturn. There is also anticipation that consumer sentiment could partially recover if political uncertainty is resolved with the upcoming presidential election in June.
There are also signs that consumer spending power is reviving. According to Statistics Korea, real income per household as of the end of last year increased by 2.2% year-on-year. Disposable income that households can actually use increased by 3.2% year-on-year, and the average propensity to consume also rose to 69.6%, up 4 percentage points from the previous quarter. This means that as the perceived burden of prices eases, spending power is gradually recovering.
The decrease in money spent on overseas travel is also acting as a positive factor for department store consumption. Overseas travel expenditures, which surged after the pandemic, have recently shown a somewhat calming trend. As of March this year, national overseas travel expenditure decreased by 1.2% year-on-year, and per capita expenditure also decreased by 3.8%. Total overseas consumption also decreased by 6.9% compared to the end of last year. This indicates that consumer spending is turning back towards the domestic market.
In line with this trend, the department store industry is also staking its fate on attracting high-end brands. Lotte Department Store opened a Van Cleef & Arpels high-end jewelry store on the first floor of its main store earlier this year. By adding Van Cleef & Arpels to its portfolio alongside Bulgari, Tiffany, and Cartier, all four of the world’s top luxury jewelry brands are now present at Lotte Department Store’s main store. Furthermore, with the confirmed entry of Graff, Lotte Department Store’s main store has established itself as a high-end jewelry mecca in Seoul’s Gangbuk area, alongside Chaumet, Damiani, Boucheron, and Chopard.
Shinsegae Department Store is holding a Luxury Watch & Jewelry Fair this month at all 13 of its nationwide stores. Participating brand ‘Jaeger-LeCoultre’, which started in 1833 in the Swiss canton of Val-de-Travers, will showcase the Reverso Tribute Duoface Small Seconds, popular for its modern design, and the diamond-set Reverso Classic Medium Duetto. During the event period, a 7% reward benefit on the payment amount will be provided for purchases of a single watch or jewelry brand exceeding 2 million won.
Hyundai Department Store has embarked on a renovation of The Hyundai Seoul. It plans to open a Van Cleef & Arpels store in July this year. In the second half of the year, it will newly establish a Luxury Watch Hall on the second floor, gathering luxury watch brands currently located on the first floor, such as Zenith, TAG Heuer, Breitling, Girard-Perregaux, and Hublot. The idea is to increase the average transaction value by strengthening high-end brands.
This month, the Swiss watch brand Moser & Cie. entered the luxury hall of Galleria Department Store. It is an independent brand not belonging to the global top three watch groups (Richemont, Swatch, LVMH) and has a history of about 200 years. The number of watches produced per year is a maximum of about 4,000, with the highest price reaching around 150 million won.