Re­tail­ers trou­bled by Korea Sale Festa

The Korea Times - - BUSINESS - By Nam Hyun-woo [email protected]­re­atimes.co.kr

Korea Sale Festa, an an­nual na­tion­wide sales event, has be­come a headache for de­part­ment stores and other re­tail­ers as the in­dus­try min­istry forces them to take part in the event de­spite in­cur­ring losses, ac­cord­ing to re­tail in­dus­try of­fi­cials Fri­day.

Con­sumers are also not in­ter­ested in the gov­ern­ment-led sales event, they said, adding the range of prod­ucts and dis­count rates are not at­trac­tive enough for them to open their wal­lets.

Ac­cord­ing to the Korea Sale Festa or­ga­niz­ing com­mit­tee, the event will start on Nov. 1 and last un­til Nov. 22. More than 600 re­tail­ers, man­u­fac­tur­ers and ser­vice firms will join the cam­paign, of­fer­ing a va­ri­ety of dis­counts for cus­tomers.

This year’s event, how­ever, stirred con­tro­versy as de­part­ment stores were “con­sid­er­ing” a boy­cott of the event, cit­ing the gov­ern­ment’s push on stores to of­fer huge dis­count rates.

The Fair Trade Com­mis­sion (FTC) will im­ple­ment a new reg­u­la­tion, oblig­ing de­part­ment stores to pay half of the dis­counted amount to the man­u­fac­tur­ers of prod­ucts. For ex­am­ple, when a de­part­ment store sells a $100 prod­uct at $70, it has to pay $15 to the man­u­fac­turer.

Cur­rently, de­part­ment stores and man­u­fac­tur­ers shoul­der the cost of spe­cial of­fers in ac­cor­dance with their pre-de­ter­mined sales fee rates. This means the new rule will lower de­part­ment stores’ rev­enue dur­ing the sale pe­riod. Ini­tially, the reg­u­la­tion was planned to take ef­fect on Oct. 31. As de­part­ment stores stage op­po­si­tions, how­ever, the FTC de­cided to post­pone the im­ple­men­ta­tion af­ter Korea Sale Festa and de­part­ment stores de­cided to join the dis­count event.

Even though they de­cided to par­tic­i­pate, de­part­ment stores re­main doubt­ful about the ef­fec­tive­ness of the event.

“For de­part­ment stores, more dis­counts mean more losses, and it is true that de­part­ment stores worry about the profit mar­gins,” a re­tail in­dus­try of­fi­cial said ask­ing not to be named.

“De­spite the wor­ries, de­part­ment stores are par­tic­i­pat­ing to the event, due to re­peated calls from the or­ga­niz­ing com­mit­tee.”

An­other re­tail in­dus­try of­fi­cial, who de­clined to be named, said par­tic­i­pat­ing de­part­ment stores are fo­cus­ing on of­fer­ing gifts rather than dis­counts to avoid losses. The Min­istry of Trade, In­dus­try and Energy had been or­ga­niz­ing the event un­til 2018, and it handed it over to the pri­vate com­mit­tee, which is un­der the Korea Cham­ber of Com­merce and In­dus­try, say­ing the event needs to be led by busi­nesses.

How­ever, re­tail in­dus­try of­fi­cials said the min­istry is vir­tu­ally con­trol­ling the com­mit­tee, be­cause the gov­ern­ment over­sees the com­mit­tee’s bud­get.

The min­istry flatly de­nied any con­tro­ver­sies re­gard­ing Korea Sale Festa.

“De­part­ment stores have not of­fi­cially an­nounced their boy­cott and have been ac­tively par­tic­i­pat­ing in the event,” the min­istry said.

With de­part­ment stores reluc­tantly join­ing the event, con­sumers also have low ex­pec­ta­tions.

Ac­cord­ing to min­istry data, 451 firms par­tic­i­pated in last year’s Korea Sale Festa, up from 92 in the event’s first edi­tion in 2015, but the com­bined sales of the top 100 par­tic­i­pat­ing com­pa­nies re­mained the same at 4.5 tril­lion won.

Sung Yun-mo in­dus­try min­is­ter

Kim Yeon-hwa, Korea Sale Festa head

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