In 2025, South Korea’s retail sector is facing a clear divide. While supermarkets are seeing a steady recovery in sales, department stores are struggling due to a slowdown in luxury consumption. This shift reflects changing consumer behavior in a high-cost economy—and it could reshape investment strategies in the retail space.
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Supermarkets Rise on the Back of Practical Consumption
As of March 2025, total sales at large supermarkets dropped slightly by 0.2% year-on-year, but sales per store increased by 1.5%, with food category sales up 2.7%
(Source). This indicates a growing demand for essential, value-driven purchases among consumers.
Retail giant E-Mart reported Q1 sales of KRW 4.63 trillion and operating profit of KRW 133.3 billion, marking a year-on-year increase of 10.1% and 43.1%, respectively
(Source). The company's success is largely driven by its warehouse stores and competitive private label (PB) products.
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Department Stores Struggle Amid Luxury Fatigue
In stark contrast, department stores saw a 2.1% year-on-year decline in sales in March 2025
(Source). For instance, Hyundai Department Store posted Q1 sales of KRW 589 billion, down 0.8% year-on-year, with operating profit falling 5.7% to KRW 97.2 billion
(Source).
Shinsegae Department Store also experienced a dip, with Q1 sales at KRW 1.79 trillion and operating profit down 5.1% to KRW 107.9 billion
(Source). The decline is attributed to weakened demand for luxury goods, combined with high interest rates and economic uncertainty.
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What This Polarization Means for Investors
We’re witnessing a stark bifurcation between value-driven and premium consumption. Supermarkets are gaining ground by appealing to budget-conscious shoppers, while department stores face headwinds due to the drop in discretionary and luxury spending.
For investors, companies operating supermarkets (like E-Mart and BGF Retail) may enjoy short-term tailwinds, especially during economic slowdowns. On the other hand, department store operators (like Shinsegae and Lotte Shopping) could struggle if the luxury slump continues—although a potential rebound in Chinese tourism later this year may offer some upside.
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Final Thoughts: A Shift in Consumer Values
This divergence between supermarkets and department stores reflects more than just competition—it points to a transformation in consumer priorities. More people are focusing on essentials and value, while fewer are indulging in high-end goods amid economic caution.
As the retail landscape continues to evolve, it’s crucial for companies to understand and adapt to these shifts. Investors, too, should take note of the changing winds and adjust strategies to align with new consumer behaviors in 2025.
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