Retailers troubled by Korea Sale Festa
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