Korea's economic outlook and evolving consumers: Nielsen

Amid economic downturn, Korean consumers are becoming more considered and savvy in their spending. 

Gradual signs of economic recovery led by advanced markets such as the US, Europe and Japan are a positive signal for Korea’s economic outlook, however, consumer sentiment is yet to reflect any shift in sentiment with Koreans’ confidence levels ranking among the lowest globally. Nine out of 10 Korean consumers (91 percent) believe Korea is in economic downturn[i] and the ratio of household debts to disposable income has reached a record high, weakening consumer spending power.

Online shopping malls have benefited from this shift, as consumers flock online to compare prices, product information and reviews. An overwhelming majority of Korean consumers (80 percent) have used online shopping malls and around half have accessed online stores via their mobile phone.[ii] And while categories such as clothing and electronic goods continue to enjoy high online purchase rates, new categories are emerging such as fresh food thanks to improving quality and delivery services.

In this ever-growing e-commerce landscape, distributors are taking drastic measures, re-shaping their entire business models to hone in on mobile markets which display significantly higher potential than offline markets. Many businesses are ramping up in their efforts to attract consumers to their online market by developing their own private label product ranges exclusively for online malls and improving the quality of their customer service by investing in areas such as fulfilment (same-day delivery) and offering compensation for delivery delays. Many are also strengthening their online to offline (O2O) services which link online malls with offline distributors, including department stores and large marts as well as improving purchase convenience via mobile payment methods such as Smile Pay and Syrup Pay.

Meanwhile, demographic shifts such as the increase of one or two person households and dual-income households has seen the emergence of entirely new categories. Home meal replacements is one example, where there has been continuous double-digit growth in recent years. Similarly, the convenience channel has benefited from smaller households and busier lifestyles thanks to its smaller pack sizes and on-the-go product range. High quality private label offerings have also seen a surge in popularity, growing at double-digit rate, as consumers seek affordable quality, while concern around air pollution combined with an increasing focus on hygiene post-MERS is driving double-digit growth in the personal hygiene category. 

In today’s environment of record-low consumer confidence and burgeoning digital channels, it is critical for brands to differentiate themselves by providing shopper-centric value and employing a true omni-channel strategy across both online and offline channels.

Shawn Yoon is director, marketing effectiveness, at Nielsen Korea