Korea's retail market is forecast to grow at its slowest pace in five years in 2026, as prolonged high inflation and elevated exchange rates weigh on consumer sentiment and squeeze profit margins.
A survey of 300 retail companies nationwide conducted by the Korea Chamber of Commerce and Industry (KCCI) projected retail market growth of just 0.6% next year, the lowest in the past five years, the chamber said Sunday.
Respondents cited weakening consumer sentiment (67.9%), high prices (46.5%), intensifying market competition (34.0%), and household debt burdens (25.8%) as the main factors behind the slowdown.
Growth prospects varied sharply by retail format. Online shopping is expected to grow 3.2% next year, buoyed by value-conscious consumption trends and competitive delivery services. Department stores (0.7%) and convenience stores (0.1%) are forecast to post modest gains.
Offline retailers, however, face contraction. Hypermarkets and supermarkets are both projected to shrink by 0.9%, hurt by intensifying competition with online channels, a shift toward smaller-quantity purchases, and margin erosion from discount wars.
The industry's top news story of 2024 was the government's consumer coupon program aimed at boosting domestic demand, cited by 44.7% of respondents. The program drove sales growth primarily at traditional markets and small to mid-sized supermarkets. Prolonged sluggish domestic demand (43.0%) and slowing e-commerce growth (38.3%) also ranked among the top concerns.
Industry experts stressed the need for preemptive measures amid weak domestic demand and fierce competition.
"With domestic market growth stagnating and competition intensifying, it's crucial for large and small retailers to collaborate on overseas market expansion," said Park Kyung-do, a professor at Sogang University and president of the Korea Distribution Association. "We need to secure new growth engines by developing markets in the Global South, focusing on K-content-linked products such as K-beauty and K-food where Korea has competitive advantages."
Lee Hee-won, head of KCCI's Distribution and Logistics Promotion Agency, said restoring consumer confidence and expanding growth potential would require consumption-boosting initiatives like the Korean Grand Festival, regulatory reforms aligned with global standards, fostering high-tech industries at regional hubs, and building infrastructure for artificial intelligence and other advanced technologies.
