Add “K-shaped” consumer polarization to the list of Korean trends

There are concerns that “K-shaped” consumer polarization may deepen in the retail industry as high inflation and a prolonged recession continue.

K-shaped consumer polarization refers to a widening gap in spending between high-income consumers and middle- or lower-income consumers.

Department stores were the only one of the five retail sectors – department stores, hypermarkets, duty-free stores, department stores and variety stores and convenience stores – to post higher sales in 2025 than a year earlier, according to Korean Statistical Information Service data on retail sales by store type released on Thursday.

Retail sales of the sector reached 41.4 billion won ($27.5 billion) in the first figures of 2025, up from 40.6 billion won in 2024.

At the same time, sales of convenience stores fell to 31.6 trillion won, a decrease of 100 billion won from 2024, while sales of duty-free stores reached 12.5 trillion won, a decrease of more than 2 trillion won. Since related data collection began in 2020, retail has been the only channel to report annual sales growth.

Hypermarkets, on the other hand, have reported their lowest ever year since retail sales by channel began to be tracked. Hypermarket sales reached 36.4 trillion won in 2025, down about two percent from about 37.1 billion won in 2024.

Sales in 2025 at hypermarkets in the home and home and traditional appliances decreased by 10.1 percent and 10.9 percent from last year, according to the Ministry of Trade, Industry and Resources. The sale of food, which is the main part of the product of the sector, has also decreased by 2.9 percent from 2024.

The area around Gwanghwamun Square in central Seoul before the performance of “BTS The Comeback Live: Arirang” on March 21. [DANIELA GONZALEZ PEREZ]

Experts have pointed to the departure of middle-class customers as the main reason for the weak performance across retail channels other than retail stores. A prolonged recession appears to be weighing on daily spending.

“Department stores are not only successful in attracting customers with experiential content like pop-ups, but they were also less affected because their main customers are high-income customers who are not affected by the economic downturn,” said Lee Hong-joo, a professor in the Department of Consumer Economics at Sookmyung Women’s University. “On the other hand, middle- and lower-income consumers have reduced spending or flocked to retailers that offer lower-priced goods, producing a typical polarization of K.”

In fact, VIP customers accounted for half of the total sales in 2025 at the country’s three largest stores. VIP sales made up 46 percent of total sales at Lotte Department Store and Hyundai Department Store and 47 percent at Shinsegae Department Store last year.

Each company is doubling down on premium strategies, including expanding luxury phones and upgrading VIP membership levels.

Hypermarkets and convenience stores, which once experimented with experience-driven strategies with luxury product lines, are now focusing on low-cost private label (PB) brands. Emart recently launched 127 new products under its private brand 5K PRICE, including a hair dryer at 5,000 won and a vacuum cleaner at 9,000 won, as well as other types of home appliances and living products priced at 10,000 won.

A convenience store near Gwanghwamun Square in central Seoul displays a banner welcoming BTS’ March 22 comeback. [NEWS1]

5K PRICE initially focused on processed food, but now Emrt wants to attract customers with value-for-money products in home appliances and household goods, categories that set weak sales in 2025.

GS25, the convenience store chain operated by GS Retail, has also expanded its list of 1,000 captured criminals on March 12. It also rolled out an ad that offered customers a free cup of ice with the purchase of a bag of drinks at a year-round event.

“We have expanded our range of low-cost PB pouches to ease the burden on consumers during peak price periods,” beverage group retailer GS25 said.

Lee Jung-hee, a professor at Chung-Ang University’s School of Economics, said: “As more consumers seek to spend more during the long-term decline in domestic demand, hypermarkets are changing their sales strategies by focusing on value-for-money products. “In shopping channels outside of department stores, competition based on value-for-money products to attract middle-class customers is likely to continue. for some time.”

This article was originally written in Korean and translated by a bilingual reporter with the help of AI generating tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and improved by our newsroom.

BY NOH YU-RIM [kim.minyoung5@joongang.co.kr]