Retailers, restaurants, hotels brace for plunging sales amid impeachment drive

Political unrest slows down businesses, data shows

By Ko Dong-hwan

President Yoon Suk Yeol's declaration of martial law on Tuesday is taking a toll on the country's retail, restaurant and hotel industries as the president's abrupt move — reversed only hours later by the National Assembly — prompted the public to stage a series of street protests. Enraged public sentiment has put consumption activities across markets in the backseat.

From shops at tourism hot spots around Seoul to restaurants across the capital’s Yongsan District where the presidential office is located, businesses' sales are now expected to take a hit as an increasing number of citizens take to the streets. Data from the past shows that such low-key consumption tends to occur whenever the country is mired in political turmoil.

Department stores are one of the sectors likely to be affected by the restive mood. Especially with the year-end just weeks away and shoppers expected to gather and spend more than any other time of the year, the situation has struck an untimely blow.

A similar scenario happened in 2016 when massive candlelit protests filled the streets of downtown Seoul for months demanding then-President Park Geun-hye to step down. It was sparked by prosecutorial investigations which had discovered that Park’s longtime friend, Choi Soon-sil, was behind the curtains influencing the former president’s key decisions.

At the time, Lotte Department Store’s main branch in Seoul’s Myeong-dong, one of the city’s largest tourism hot spots, saw its sales plunge by 11.1 percent from the previous year, according to industry experts.

Shinsegae Department Store’s main branch in Sogong-dong next to Myeong-dong also saw a 5.5 percent fall during the same period. A Shinsegae official had said at the time that the protests concentrated across downtown Seoul around City Hall and Gwanghwamun Square prevented shoppers from visiting the company’s main branch.

This year, department stores are now predicting a situation similar to the past. They are planning ways to minimize the fallout, according to industry observers. Hosting sales and livestreaming events to promote products are considered the most feasible options to lure back shoppers.

“If protests grow bigger and last longer, it is inevitable there will be less and less people to visit local department stores,” an industry official said. “But because our key objective is securing high year-end sales, we are coming up with various countermeasures.”

While the fiasco has already discouraged people around the world from visiting Korea, the fallout is now on commercial sectors relying on tourists. Duty free shops, health and beauty (H&B) shops and fashion boutiques are anticipating dropping sales. CJ Olive Young, the country’s largest H&B company, has become a must-visit attraction for foreign tourists. Daiso and Musinsa stores have also drawn attention with their variety of everyday household items for affordable prices and the trendiest outfits and shoes.

“Due to K-brands’ global popularity, the company has been planning to expand its consumer markets across Japan, China, Southeast Asia, North America and Europe,” a cosmetic company official said. “But the current political vertigo might cause those plans to lose momentum.”

Hotels anticipate their sales from conference hall and wedding hall rentals might plunge due to the simmering street demonstrations. The volume of customers at hotels could be affected as well. The industry had witnessed similar effects in 2016, as well as in 2008 during the mad cow protests. An official at a hotel near Seoul City Hall said that the company’s wedding hall rental business in 2016 sustained a sales plunge by almost 20 percent during the protest-driven social unrest.

The build-up of public anger against Yoon is now also building up tension across local restaurants. Just like department stores, restaurateurs are anticipating lower-than-usual sales, particularly at this year-end season which usually sees a rise in meetings and parties.

“We have given up any hope of making year-end big bucks,” an owner of a restaurant in Yongsan said. “I just want to pull the business through this hard time without losing it.”

A Bank of Korea report from 2017 analyzed how extreme social unrest during impeachment-related protests regarding former presidents Roh Moo-hyun (2004) and Park Geun-hye affected the service industry, company investments and public consumption. It pointed out that sectors most closely related to consumers’ everyday consumption like food and retail took the largest hits. Temporary workers and self-employed business operators also sustained the most damage, it added.