[Edaily Reporter KIM JUNG YOU ] Some sectors of the domestic retail industry, such as department stores and hotels, are continuing to “quietly hold their ground” amid the prolonged period of high exchange rates. While other industries are struggling with cost pressures caused by the strong won, sectors that rely heavily on inbound tourism—such as department stores and hotels—are reaping significant benefits from the weak won. The industry’s strategies to strengthen its core competitiveness in order to capture the ever-increasing demand from foreign visitors also appear to be gaining momentum this year.

According to FnGuide Inc. on the 21st ( Shinsegae Co.,Ltd(004170)), the company’s consolidated operating profit for the second quarter of this year is projected to reach 141.3 billion won, an 87.5% increase compared to the same period last year. Revenue is estimated to reach 1.7911 trillion won, a 5.7% increase year-over-year. In terms of operating profit growth rate, it is expected to be higher than that of the first quarter (49.4%). Strong performance in the department store business, driven by expanding foreign demand, is expected to lead overall earnings growth.

In fact, the share of sales to foreign customers at Shinsegae Co.,Ltd’s main branch has recently risen to nearly 30%. According to Shinsegae Co.,Ltd, foreign demand continues to grow in the second quarter, following the trend from the first quarter. As of last month (January–May), foreign sales at the main branch reportedly increased by 170%. Most of this foreign demand is said to be concentrated in luxury goods stores, driven by the weak won. Recently, the won-dollar exchange rate has been fluctuating in the low 1,500 won range.

A Shinsegae Co.,Ltd official analyzed, “Just as foreign shoppers flocked to Japanese luxury stores during the yen’s depreciation in the past, the same is happening in Korea recently. There is a strong expectation within the industry that the second quarter will be even better than the first,” adding, “It also appears that Chinese tourists have reduced their travel to Japan due to bilateral tensions, which has contributed to this trend.”

Not only Shinsegae Co.,Ltd. but also Lotte Department Store’s main branch saw foreign sales increase by 130% as of last month, while The Hyundai Seoul recorded a 129% increase. This strong performance is not limited to Shinsegae Co.,Ltd.; the entire domestic department store industry is reaping the benefits of the favorable exchange rate.

The situation is similar in the hotel industry. With the recent boom in K-content driving an increase in foreign visitors to Korea, coupled with the weak won boosting their purchasing power, occupancy rates are on the rise. Guests are primarily flocking to 4-star hotels in areas popular with foreign tourists, such as Myeongdong and Hongdae. At Lotte Hotel, foreign guests accounted for over 90% of guests at L7 Myeongdong by Lotte as of last month. The foreign guest occupancy rate at the Courtyard by Marriott Myeongdong, located near Myeongdong, is also reportedly around 90%.

A Lotte Hotel official stated, “With foreign revenue already showing growth last year—up 14% year-over-year—the weak won appears to be driving even more visitors,” adding, “The increase in foreign revenue at the five-star Lotte Hotel Seoul is due to a combination of factors, including the overall growth in tourism and an increase in business events.”

The effects of the weak won are spreading beyond brick-and-mortar stores to the e-commerce market as well. According to the Korea Integrated Logistics Information Center, as of last April, domestic e-commerce exports totaled $224.58 million (approximately 342.8 billion Hanwha won), a 77% increase compared to the same period last year. This marks the first time monthly exports have surpassed $200 million. Analysts suggest that the weak won served as a catalyst for this growth.

Since cross-border e-commerce is conducted through e-commerce platforms, it creates a trickle-down effect across various industries, such as K-cosmetics (K-Beauty) and fashion. Consequently, e-commerce platforms like 11st and Gmarket are strategically expanding their cross-border e-commerce operations by partnering with overseas platforms. 11st has opened an “11st Specialty Store” in partnership with China’s JD.com, while Gmarket has expanded its cross-border e-commerce channels through the Southeast Asian platform Lazada.

Market sentiment suggests that, due to various variables, the won-dollar exchange rate is unlikely to fall back to the 1,300–1,400 won range seen in the past for some time. Consequently, it is predicted that retail sectors benefiting from the weak won—such as department stores, hotels, casinos, and cross-border e-commerce—will continue to perform well for the time being. However, since the exchange rate effect is an external variable unrelated to a company’s fundamental competitiveness, there is advice that companies should proactively restructure their business models to adapt to the times in the medium to long term.

Some companies have already begun restructuring on their own initiative. Shinsegae Co.,Ltd., for example, is revamping the lineup of luxury brands—including Hermès, Louis Vuitton, and Chanel—at its flagship store, where demand is particularly high. At its Busan Centum City location, the company plans to attract foreign customers by strengthening promotions targeting short-term travelers from East Asia and cruise ship passengers. In addition, the department store industry is enhancing its services, such as by expanding membership benefits for foreign customers. Hotels are also actively revamping their offerings, such as incorporating Korean-style snacks into breakfast buffets or launching packages in collaboration with K-beauty brands.

Seo Yong-gu, a professor in the Department of Business Administration at Sookmyung Women’s University, emphasized, “Since many view the exchange rate in the 1,500 won range as having become the ‘new normal,’ we predict that the favorable conditions for related industries will continue for some time.” He added, “However, since this success stems from external factors rather than the companies’ own efforts, they should use this opportunity to ‘level up’ their fundamental competitiveness and explore ways to elevate Korea to a major player in the hospitality industry.”