What: Korean department store industry experiences significant slowdown and market polarization as growth rate falls below 1%, with success increasingly concentrated in metropolitan areas.

Why it is important: The polarization between metropolitan and regional performance signals a fundamental shift in retail dynamics, challenging traditional expansion strategies and requiring new approaches to maintain growth.

The Korean department store industry's growth rate has declined dramatically from over 10% in 2021-2022 to less than 1% in 2024, reaching 39.8 trillion won in total transactions. Market leader Lotte captured 34.8% market share with 13.8 trillion won in transactions, followed by Shinsegae at 31.7% and Hyundai at 23.7%. While Lotte and Shinsegae showed modest growth of 1.2% and 3.7% respectively, other major players experienced declines. The industry's polarization is particularly evident in store performance, with only 12 stores achieving trillion-won transactions, predominantly in metropolitan areas. These top performers, representing just 18% of total stores, generated 53% of total transaction volume and grew 5% year-over-year, significantly outpacing the industry average. The remaining 56 stores saw a 3.3% decline in transactions, highlighting the growing disparity between metropolitan and regional performance.

IADS Notes: The slowdown in Korean department store growth to less than 1% reflects broader industry challenges and transformation. January 2025 data shows major players like Lotte and Shinsegae actively seeking new markets amid domestic consumption decline. This trend prompted Shinsegae's November 2024 strategic split of department store and E-mart operations to address divergent performance patterns. Retailers are responding by transforming stores into entertainment spaces, as evidenced by February 2024 reports. The market polarization is further highlighted by February 2024's contrasting performance between Emart's struggles and Shinsegae's department store success. This transformation occurs as traditional retailers face increasing competition from e-commerce players like Coupang, whose February 2024 growth poses a significant threat to established players. The concentration of trillion-won stores in metropolitan areas and the growing gap between urban and regional performance underscore the industry's structural challenges, pushing major retailers to reimagine their business models while maintaining market share in key urban centers.

Stagnating sales in Korea leads to increased differentiation between department stores