The department store industry in South Korea is expected to face intensified polarization and undergo significant restructuring next year. Economic uncertainties fueled by President Donald Trump’s second term and the widening gap between the capital region and provincial areas are anticipated to drive major department stores to accelerate restructuring efforts.
On Dec. 2, the Korea Chamber of Commerce and Industry (KCCI) hosted a seminar at its headquarters to discuss the outlook for the retail industry in 2025. The event explored upcoming trends and anticipated changes across various sectors, including department stores, large discount stores, convenience stores, and online markets.
The KCCI predicted that the department store market in the nation is forecast to see faster polarization.
Kim In-ho, Vice Chairman of Business Insight, said, “Next year, the ‘Big Three’ department store chains—Lotte, Shinsegae, and Hyundai—will likely ramp up restructuring of stores ranking outside the top 20, marking the start of a second major overhaul since the early 2000s.” He added that restructuring efforts would extend across the industry, including the leading players.
As of this year, 12 department stores nationwide recorded annual sales exceeding 1 trillion won ($712 million), making up more than half of total department store revenue.
By contrast, 20 smaller stores with annual sales below $1.4 billion combined generated less revenue than a single top-performing store like Shinsegae Department Store’s Gangnam branch, which brought in $2.1 billion. Kim projected that total department store sales would shrink by around 1.7% next year, reaching approximately $28.4 billion.
Large discount stores, however, are expected to rebound from a 0.5% contraction this year to 0.8% growth next year.
Lee Kyung-hee, who leads E-Mart’s research institute on the retail industry, said, “While easing inflation and interest rates may bring modest improvements in consumer spending, the impact will likely remain limited.” She added, “Worsening climate changes and the expanding use of artificial intelligence are likely to make the market more unpredictable.”
Lee also predicted that large discount marts will focus on bolstering their food sales next year. This is due to the steady rise in food-related revenue, which made up 65.7% of total sales in 2021 and increased to 69.9% as of September this year. She added that the easing of inflation and interest rates, along with the replacement cycle for home appliances and furniture, could also improve performance in non-food categories.
The neighborhood retail sector, known as “Super Supermarkets” (SSMs, a large-size supermarkets), is expected to continue its growth into next year.
Kim Jong-wook, CEO of AZdata, said, “The ongoing burden of food expenses and the trend of frugal consumption will drive the continued growth of SSMs.” He added, “While the convenience store market is saturated, SSMs such as Lotte Super and GS The Fresh still have room for store expansion.”
However, Kim noted that independent supermarkets, despite similar accessibility, may struggle to grow. “Even with government policies aimed at supporting small businesses, independent supermarkets struggle to compete because they lack clear points of differentiation that would set them apart from other retailers,” he explained.
The convenience store sector, meanwhile, is expected to face challenges such as intensified competition and rising minimum wages.
However, during economic downturns, the demand for small, immediate purchases at nearby locations often increases. Analysts suggest this could offset some of the negative impacts by allowing convenience stores to absorb sales from other retail sectors more sensitive to economic conditions.
Shin Jong-ha, a director at BGF Retail, remarked, “Next year, convenience stores with specialized themes, focusing on products like ramen, fashion, and beauty, are expected to open.” He stressed that only convenience store brands that stay ahead of trends, leverage technology, foster collaboration, and deliver social value will be able to thrive in the competitive market.
The duty-free sector, which has experienced a slow recovery this year, is expected to face continued difficulties. Although airport passenger numbers in October recovered to more than 95% of 2019 levels, the recovery rates for duty-free shoppers and sales stood at just 59%.
