Consumers Shift to Supermarkets Amid Economic Downturn

Exterior View of GS The Fresh Apgujeong Branch (Photo Courtesy of GS Retail)

SEOUL, Feb. 11 (Korea Bizwire) — Faced with the worst economic downturn in 21 years, South Korean consumers are increasingly turning to supermarkets over big-box retailers, preferring to buy necessities in smaller quantities rather than bulk purchases.

According to data from Statistics Korea and industry sources, total retail sales fell by 2.2% in 2024, marking the steepest decline since the credit card crisis of 2003 (-3.2%). The downward trend, which began with a 0.3% dip in 2022, accelerated to 1.5% in 2023, and further deepened last year.

Since retail sales tracking began in 1995, declines have been recorded only during major economic crises, including the IMF financial crisis in 1998 (-16.3%), the 2003 credit crisis (-3.2%), and the COVID-19 pandemic in 2020 (-0.1%). However, in past downturns, sales rebounded within a year—making the current three-year consecutive decline unprecedented.

The economic slowdown has severely impacted department stores and large retailers, with declining revenues and operating profits. However, corporate supermarkets (SSMs) have defied the trend, posting steady growth.

For example, GS The Fresh, operated by GS Retail, recorded ₩1.6 trillion in revenue and ₩31.5 billion in operating profit in 2024, marking year-on-year increases of 11.1% and 15.4%, respectively. 

The company has now achieved revenue growth for three consecutive years and profit growth for two years, coinciding with the broader decline in retail sales. Analysts suggest that SSMs are emerging as a “recession-proof” retail channel, attracting budget-conscious consumers during economic downturns.

Similarly, Lotte Super reported ₩1.3 trillion in revenue and ₩29.3 billion in operating profit. While revenue dipped 0.8% year-on-year, operating profit surged 14.4%, marking two consecutive years of profitability growth since the ₩5.5 billion loss in 2022. This contrasts sharply with Lotte Mart, where revenue and operating profit declined by 2.8% and 25.5%, respectively.

Among Lotte Shopping’s retail divisions, only SSMs and home shopping reported an increase in operating profits. Given that Lotte Home Shopping faced temporary broadcasting restrictions in 2023, SSMs effectively stood alone in driving growth.

Experts attribute the success of SSMs to their convenience and focus on smaller-packaged goods, catering to a consumer base increasingly wary of economic uncertainty and inflation. These stores also complement online grocery services, offering immediate, small-scale shopping options for nearby residents. 

An industry insider noted, “Consumers are moving away from bulk-buying at big-box retailers and instead prefer quick, small purchases at local supermarkets.”

Findings from the Ministry of Trade, Industry, and Energy support this shift. In 2024, SSMs saw 4.6% year-on-year revenue growth, surpassing convenience stores (4.3%) and significantly outperforming department stores (1.4%) and big-box retailers, which saw a 0.8% decline.

As economic challenges persist, the supermarket sector is expected to remain a key player in South Korea’s evolving retail landscape.

Ashley Song (ashley@koreabizwire.com)