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Consumer demand splits between ultracheap goods and high-end luxury items

Published: 20 Apr. 2026, 05:00

A Hermes store at Shinsegae Department Store in Jung District, central Seoul [SHINSEGAE DEPARTMENT STORE]

Korea’s consumer market is increasingly splitting in two, with demand surging for both ultracheap goods and high-end luxury items while midpriced products are losing ground.

“There is no middle,” said a retail industry executive, implying that fewer consumers are buying midrange products at in-between price points. “If you look at it in extreme terms, only budget products or the most expensive items are selling.”

“As high inflation and high interest rates persist, consumption patterns are clearly splitting into ‘survival spending,’ focused on ultralow prices, and ‘experience spending,’ centered on luxury goods,” the executive continued. “Brands and products with vague positioning and midlevel pricing are struggling in the market.”

Kim Sun-hwa, a homemaker raising two children, shared a similar view.

“Before the Covid-19 pandemic, I used to buy my children clothes from popular brands, but these days I don’t even look at them unless they are relatively affordable SPA brands,” Kim said, referring to specialty retailers of private-label apparel, including the brands Uniqlo, H&M and Zara.

“Prices keep rising, but income isn’t, so ordinary people have less room to spend,” she added.

As high inflation and interest rates persist, demand for ultralow-priced goods in the range of a few thousand won is increasing; meanwhile, sales of luxury jewelry and bags priced in the tens of millions of won are surging on the other end.

Analysts say this reflects a “K-shaped” economy, in which only certain industries, such as semiconductors, thrive while sharp rises in real estate and stock prices widen asset gaps.

Ultralow-cost consumption has, in fact, become a dominant trend in the consumer market amid high inflation and interest rates following the pandemic.

A Daiso store in Goyang, Gyeonggi [EMART]

Large discount stores, fixed-price retailers — such as the dollar store chain Daiso — and SPA brands are seeing rising sales by targeting lower-income consumers with high-volume, low-margin strategies.

Daiso posted 4.54 trillion won ($2.72 billion) in sales and 442.4 billion won in operating profit last year, up 14.3 percent and 19.2 percent, respectively, from the previous year.

Combined sales of major SPA brands — Uniqlo at 1.35 trillion won, Topten at 900 billion won, SPAO at 600 billion won, Musinsa Standard at 470 billion won and 8seconds at 300 billion won — exceeded 3 trillion won last year.

“Securing cost competitiveness by running directly operated production facilities in Myanmar and Indonesia was key,” said a representative of Shinsung Tongsang, which operates Topten.

As competition intensifies, major offline retailers such as Emart and Lotte Mart have also entered the ultralow-price field. For example, Emart launched its popular budget lifestyle shop late last year.

Lotte Mart is also strengthening its price-cutting and fixed-price strategies through private brand products such as “Good Today” and “Yorihada," which means "to cook" in Korean. The company said that sales are increasing, particularly for essential goods such as milk, wet wipes and sauces.

Homeplus has also introduced snacks, frozen foods, beverages and hygiene products priced in the 1,000 won range under its private brand Simplus.

“The ultralow-price strategy is not a one-off discount but a strategic business model that stimulates consumption in an era of high inflation,” said Lee Eun-hee, a professor of consumer studies at Inha University.

A Uniqlo store in Seoul [YONHAP]

While value-for-money consumption is gaining popularity, high-end luxury goods such as jewelry worth tens of millions to hundreds of millions of won are also selling well. This reflects the so-called Veblen effect, in which demand for certain goods increases as prices rise due to their status as symbols of conspicuous consumption, regardless of economic downturns.

In March, sales of high-end jewelry at the country’s three major department stores — Lotte, Shinsegae and Hyundai Department Store — rose an average of 59.6 percent compared to the same period last year. Prices for these products range widely, from several million to hundreds of millions of won.

The total sales of 14 major luxury brand subsidiaries in Korea, each with annual revenue exceeding 80 billion won, reached 9.27 trillion won last year, up 8.1 percent from 8.57 trillion won in 2024. This also boosted the stock prices of the three major department store operators.

This trend contrasts with the global slowdown in luxury demand.

Cécile Cabanis, the chief financial officer of LVMH, said during a recent first-quarter conference call, “Sales declined in Europe, Japan and other Asian countries due to the war in the Middle East and economic slowdown, but Korea was the only market in which sales increased.”

Department stores are investing heavily in attracting luxury brands, such as Hermès, Louis Vuitton and Chanel, and expanding store space to increase the average spending per customer.

A Chanel boutique in Seoul. [YONHAP]

Analysts say the split in private consumption is driven by widening income inequality.

In the fourth quarter of last year, income for the fourth quintile, the top 21 to 40 percent, and the fifth quintile, the top 20 percent, rose by 3 percent and 6.1 percent, respectively, from the previous quarter, according to data from the Ministry of Data and Statistics.

However, income for the third quintile, the top 41 to 60 percent, and the second quintile, the bottom 21 to 40 percent, increased by only 1.7 percent and 1.3 percent, respectively.

Rising housing and stock prices have only further concentrated wealth.

The top 10 percent by wealth held 46.1 percent of all net assets last year, the highest since records began in 2012, according to the Survey of Household Finances and Living Conditions by the Bank of Korea and the Financial Supervisory Service. This indicates that the wealth gap between high- and low-income groups has widened.

“Lower- and middle-income consumers are flocking to the cheapest options or cutting back on spending altogether, resulting in a typical K-shaped consumption polarization,” said Jo Weon-Kyoung, a professor of economics at Sejong University.

In the fourth quarter of last year, consumption spending for the second and third income quintiles declined by 0.1 percent and rose by just 0.7 percent compared to the same period in 2024, showing weaker spending than other groups.

This consumption polarization raises concerns about weakening economic recovery.

Private consumption accounted for 48 percent of GDP last year. If spending growth is concentrated in certain groups, its impact on the overall economy remains limited, as high-income consumption tends to flow more toward imports or overseas spending.

“A decline in consumption capacity among low-income groups weakens the domestic demand base,” Joo Won, head of the research division at Hyundai Research Institute, said. “Stabilizing public utility and food prices is necessary to support their spending.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY HWANG JEONG-IL [[email protected]]