COVID-19 Impacts - South Korea (April 15)

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Part
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COVID-19 Impacts - South Korea

The retail, travel, and financial verticals are three examples that provide insights into a measured outlook on the economy in South Korea as it is recovering from COVID-19. These three verticals hinge on the government's policies, economy relief packages, and intervention funds as tools implemented for economic recovery in the pandemic's face.

Retail Vertical

  • Since the outbreak of COVID-19, there have been governmental interventions in this vertical to help sustain businesses and these have provided a measured outlook on the economy in South Korea as it is recovering from the pandemic. Between February 5-12, 2020, the Korean government started the first economic support lifeline to curtail the effects of COVID-19.
  • To keep the retail economy in business, the Korean government supported vulnerable SMEs with emergency relief funds and expedited customs clearance at the ports, particularly for raw and sub-materials. It also opened the door for procuring these raw and sub-materials from alternative countries.
  • Rising from his first-chaired emergency economic council meeting, South Korean President Moon Jae-in announced a plan on March 19, 2020, to "offer 50 trillion won ($40 billion) of emergency financial aid packages for small businesses, micro-business owners, and the self-employed."
  • Through some financial institutions, SMEs also received special guarantees on business loans worth 5.5 trillion won ($4.5 billion). The banks and some other financial institutions offered six months of loan deferment, while loan interest payments are put on hold for six months also, starting April 1, 2020.
  • As the country is recovering from COVID-19, the government implemented a fourth financial stimulus package on March 24, 2020, toward providing financial support for businesses. These packages come in the form of "emergency loans and guarantees for microbusiness owners, the purchase of arrears, and adjusting liabilities."
  • The government released 58.3 trillion won ($47 billion) for this stimulus package, toward expanding benefits to retail businesses and conglomerates in the country.
  • To create liquidity in the retail market, the government, on March 30, 2020, also provided "emergency relief payment to households with income levels that fall in the bottom 70%." The emergency payment will total 9.1 trillion won ($7.4 billion) as it awaits passage by the National Assembly in April.
  • 14 million households will be beneficiaries of this emergency payment, while benefits of this intervention fund will include consumption coupons and relieve health insurance. Families will receive payments via "online and offline gift certificates issued by local governments." These families will spend this money in the retail market, therefore, the measured outlook on the retail sector looks bright during recovery from the pandemic.

Travel Vertical

  • There is a projection that South Korea will lose around 2.9 trillion won ($2.4 billion) in tourism revenue in Q1, 2020 due to the COVID-19 pandemic. By the end of the quarter, there is an expectation that the number of foreign tourists coming into the country would reduce by two million.
  • However, unlike many countries around the world, South Korea did not order a lockdown. Therefore, there remain inbound and outbound flights in the country. It is the only country with over 50 million population that didn't impose "an extreme personal travel or movement restrictions, or closed its airports or took other authoritarian actions."
  • Although there is no lockdown in South Korea, tourism is one business hit hard by COVID-19. This is the reason the Korean government is giving employment support and discount coupons to the industry. While the former will help stakeholders keep their businesses afloat, the latter will promote consumption in the industry.
  • Since March 19, 2020, the country has been expanding "special entry procedures to all travelers and is requiring a 14-day self-quarantine or isolation in facilities for all travelers entering Korea from April 1." The exception is for those on national or public interest.
  • All quarantined travelers make use of "the self-diagnosis app to update their health status." There is also a safety app every traveler must install so long as they are under self-quarantine. The safety app enables authorities to check "their suspected symptoms, their locations, and compliance with the quarantine guidelines."
  • The Incheon International Airport has its 'walk-through' testing facilities for travelers showing symptoms. Operating in an open space, these facilities allow free flow of natural air at all times.
  • These quarantine facilities at the airport guarantee a "low possibility of infection via surface contact, which allows quick and safe collection of samples from many people."
  • This process is incomparable with a general screening clinic, which allows for sample collection "every 30 minutes to allow time for disinfection and ventilation." However, foreigners without symptoms get to make use of temporary living facilities for their testing.
  • On the strength of non-suspended travel activities, safety measures at entry points, employment support, and discount coupons for tourism in South Korea, the measured outlook in the travel industry looks bright during the economic recovery from the pandemic.

Financial Vertical

  • As the country is recovering from COVID-19, "the Monetary Policy Board of the Bank of Korea reduced the Base Rate by 50 basis points from 1.25% to 0.75%, effective March 17."
  • Effective from the same date mentioned above, the Board also "reduced the interest rate on the Bank Intermediated Lending Support Facility from 0.50%-0.75% to 0.25%." The Board is also proposing to incorporate debentures issued by banks as part of collateral qualified to operate in the open market.
  • As part of measures to prevent a shock wave, the Korean government raised "the forex futures trading limit by 25% to 50% for local banks and 250% for foreign bank branches from March 19." This was despite the high volume of forex liquidity by banks in the face of the COVID-19 pandemic.
  • The government has created "an equity market stabilization fund — a temporary fund jointly invested by the financial sector, designed to be invested in equity index products." It is also safeguarding the capital market by paying attention to unfair trading practices.
  • On March 19, 2020, the central banks of South Korea and the US said there will be an establishment of "a temporary bilateral currency swap arrangement to provide U.S. dollar liquidity" in the tune of $60 billion for South Korea won. This new facility will be in place for six months minimum.
  • From March 24, 2020, there were financial market stabilization measures put in place by the Korean government "to help provide sufficient liquidity to businesses and deploy market stability tools to absorb shocks in the financial markets amid the spread of COVID-19." The stabilization fund will total 100 trillion won ($81 billion).
  • The government, on March 26, eased the forex market stability rules, which were first introduced in 2008. This became necessary because of the uncertainties in capital flows because of the pandemic. On the same day, the central bank of the country "supplied unlimited liquidity to financial institutions as part of its efforts to combat the coronavirus pandemic."
  • As mentioned earlier, there is a high volume of forex liquidity among banks in Korea despite the scourge of COVID-19. Despite the liquidity, these financial institutions are receiving tremendous support from the Korean government. Hence, the measured outlook on the financial industry in South Korea looks bright during its recovery from the pandemic.

Research Strategy

To provide examples with a measured outlook on the economy in South Korea as it is recovering from COVID-19, we focused on three sectors of the economy — the retail, travel, and financial verticals. We thoroughly explored the article by the Government of the Republic of Korea. The article was also a reference point in a blog post by the World Bank. Through careful study and analyses of this article, we provided three examples with a measured outlook on the economy in South Korea as it is recovering from COVID-19. We also corroborated and highlighted some facts from other relevant sources.

The government of the Republic of Korea is providing tremendous impacts on the three verticals of the economy through policies, economy relief packages, and intervention funds as it is recovering from COVID-19.
Part
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Part
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COVID-19 Impacts on Film and Movie Theaters - South Korea

The impacts felt by the film and cinema industry ranges from lower attendance at film festivals, disruptions in film distribution, canceled movie releases, and industry layoffs. Financial impacts will likely be felt by studios, filmmakers, and theaters, over a period.

Loss of Revenue

  • On April 1, 2020, deputy prime minister and minister of economy and finance, Hong Nam-Ki, said the government would exempt major cinema chains from paying the usual 3% movie development fund fee; to be applied retroactively beginning from February 2020. Independent movie theaters and art house cinemas with less than 1 billion won ($814,000) in annual sales are excluded from this intervention.
  • Lotte Cinema executives returned 20% of their wages as an effort to tackle slow business.

Closure of Movie Theaters

  • Due to the rise of COVID-19 cases, film attendance has plummeted to an all-time low. This has resulted in CGV, South Korea's largest theater chain, has had to shut down 35 out of 116 theaters in the southern city of Daegu, where nearly two-thirds of the confirmed infections have been reported.
  • CGV has also cut as many as half of its screenings, for theaters outside of Daegu, including minimizing of screenings.
  • Other major exhibition players, such as Lotte Cinema and Megabox, are also cutting back on screenings. This has also led to staff reduction in the theaters to minimize person-to-person contact.
  • Admission in the movie theaters had lowered by 50% February 15 – February 16, compared to the previous weekend.

Cancellation and Postponement of Films

  • Several firms postponed and canceled events such as stage greetings and talks with audiences. An example is Disney/Pixar's Onward, which was originally set for March 5, 2020.
  • Other postponed releases include Yoon Sung-Hyun's much-awaited thriller, Time To Hunt, featuring Parasite star Choi Woo-Shik.
  • Films that were set to premiere officially in theaters, for example, The Hunt, chose to debut online instead to avoid further delay.
  • To support the companies behind the production of 20 selected movies whose production in the first quarter was postponed or canceled because of the COVID-19 pandemic, the government has announced that it will subsidize a portion of their marketing costs.

Industry Layoffs

  • Last month, due to expectations that the pandemic would cause enduring economic hardships that would impact the industry, representatives of the Korean film industry asked the government for financial aid and emergency measures for companies in the industry to be able to weather the storm.
  • The requested interventions would help weaker companies to stay in business and avoid large scale layoffs across the industry, as well as aid industry workers who have already lost their jobs.
  • In line with the industry's request, the government has unveiled several measures to provide relief for the industry via a policy response. Among these measures is that the government will be providing free vocational training for 400 laid-off industry professionals or those who have not been able to pick up freelance gigs as a result of the pandemic.
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COVID-19 Impacts on TV, Music, and Live Events - South Korea

The COVID-19 pandemic has hugely impacted the entertainment industry in South Korea. The crisis has resulted in a surge in TV viewership while there has been little impact on the K-pop music industry. This COVID-19 pandemic has also resulted in the cancellation of various concerts and live events across South Korea.

A surge in TV viewership.

  • The COVID-19 crisis has significantly affected TV productions in South Korea as the TV drama producers are moving to online platforms for their press conferences, as seen in the case of Netflix series "My Holo Love" and supernatural drama called "The Cursed."
  • As COVID-19 has compelled people to quarantine themselves and stay at home, there has been a sharp spike in TV viewership as much as a 60% increase in some cases, as reported by Nielsen.
  • Post reports of COVID-19 cases in South Korea in early February, the TV viewership saw a 17% rise between the second and fourth weeks of February. As per the Nielsen report, this rise in viewership implies an additional 1.2 million viewers by February end.
  • This rise in TV viewership is even more significant if compared to data for the same time from the previous year as by February end; the average South Korean TV viewership was at 18.1 million, which is a 21.4% increase on the prior year.

Little impact on the K-pop music industry.

  • The COVID-19 outbreak has severely affected South Korea’s live music segment, but the K-pop industry seems to be coping well with the crisis with a steady release of new music albums.
  • The month of March saw a few early hiccups as girl groups like (G)I-dle, and April decided to postpone their releases. Still, there was recovery by the month-end as artists like Kang Daniel, Ong Seung Wu, EXO’s Suho, and WINNER launched new music while some other artists committed to releasing new content pretty soon.
  • Korean artists aren't forced to modify their music release strategies due to the COVID-19 crisis, as the majority of their content is made for global and digital audiences. The K-pop stars are now utilizing social media platforms like YouTube and TikTok to connect and interact with their fan base.
  • Although the COVID-19 crisis has forced televised music competition and shows to be taped without a live audience, there has been little impact on the K-pop industry owing to the dedicated fans who continue to consume K-pops online streams.

Cancellation of Live Events.

  • YG Entertainment decided to cancel AKMU’s nationwide tour, which covered cities like Suwon, Ulsan, and Cheonan during late February and early March. Similarly, the SECHSKIES concert in Seoul, which was scheduled from March 6 to March 8, was also canceled, and YG Entertainment confirmed that all tickets would be refunded without any additional fees.
  • Due to health and safety concerns, the popular K-pop group BTS decided to cancel their concerts, which were expected to be attended by two hundred thousand fans, planned for April 11-12 and for April 18-19 at Seoul’s Olympic Stadium. Other K-pop groups like GOT7, Winner, Sechs Kies, and (G) I-DLE also canceled their planned tours.
  • The COVID-19 crisis also resulted in the cancellation of major award shows like the 17th annual Korean Music Awards and the Face Music Awards 2020, the winners for which were announced online.
  • COVID-19 has resulted in postponement or cancellation of various festivals and events across South Korea this includes the likes of Danjong Culture Festival, Gangneung Gyeongpo Cherry Blossom Festival, Yeoju Heungcheon Namhangang Cherry Blossom Festival, Anyang Chunghun Cherry Blossom Festival, Tongyeong International Music Festival, Gyeong-nam Theater Festival, Busan Comic World, Seoul Philharmonic Orchestra — Haydn and Beethoven, Traditional Dance and Music Saturday Performance, etc.


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COVID-19 Impacts on Automotive - South Korea

The automotive industry in South Korea has been hugely impacted by the COVID-19 pandemic. The three ways in which corona virus has reshaped the automotive industry in South Korea include suspended production, revenue loss, and disruption in the Supply chain.

Suspended production

  • According to Xinhuanet, automotive production in South Korea plunged by 27.8% in 2020 as the virus spread around the world.
  • South Korean automotive manufacturing firms like Hyundai, Kia, GM Korea, and SsangYong Motors suspended production in some of their manufacturing facilities as a result of a shortage in automotive parts.
  • For example, Kai motors suspended production at 3 of its vehicles assembling plants in South Korea "due to a sharp fall in global vehicle demand."
  • According to Just-auto, the exportation of built-up vehicles in the country declined by 17.6% to 479, 388 units at the beginning of 2020 due to the COVID-19 pandemic.

Revenue loss

  • According to Statista, automotive firms in South Korea are anticipated to experience the most tremendous loss in their annual sales revenue, due to the corona virus pandemic.
  • The predicted drop in sales revenue amidst automotive companies in South Korea was 13.9%, accompanied by 12.8% for the auto parts, and 12.4% for petroleum products.
  • According to the Korea Automobile Manufacturers Association, the country’s car manufacturers and auto parts companies are expected to experience a cash deficit of about $23 billion as the COVID pandemic persists.
  • Hyundai recorded a sales volume of 275,044 vehicles in February, 13% lesser than the 315,820 vehicles sold in 2019 February.

Disruption in Supply chain

  • COVID-19 has a solid impact on the automotive supply chain in South Korea.
  • Automakers such as South Korea with a global supply chain are prone to see tier 2 and 3 suppliers principally affected by pandemic-related disruptions.
  • According to Auto economic times, Europe and the United States makes up about 70% of South Korean automakers' exports, and 54% of parts exports. The country is experiencing disruptions in the supply chain as a result of auto factories and dealerships shut down across the United States, Europe, and Asia.
  • Importation in the automotive industry has also dropped by approximately 40% in 2020 due to disruption in the supply chain.
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COVID-19 Impacts on Travel and Hotels - South Korea

In the tourism industry, which the OECD estimated accounted for 5.1 percent of South Korean GDP in 2016, about a quarter of all tourism spending in the country is from foreign visitors. Given a decline of 14 percent in airline passengers traveling to South Korea, the tourism industry faces a minimum of $2.4 billion in losses. More information can be found below.

Losses in the Travel Sector to South Korea by COVID-19

  • The International Air Transport Association had estimated that a relatively contained spread of COVID-19 would result in losses for the South Korean airline industry of $2.8 billion.
  • Korean Air has $4.3 billion in debt that is due this year, which will probably necessitate some form of government aid or an increase in low-interest loans.
  • The economic ripples from the slowdown also impact airport retail. With outbound and inbound travelers at Incheon International Airport down around 40 percent in February, food and beverage operators have seen sales declines of 30 to 50 percent
  • In the APAC the CDC has recommended that travelers avoid all non-essential travel to China with a level 3 warning. Hong Kong, Macau, and Taiwan are not included in this recommendation, but Hong Kong has a level 1 travel notice. South Korea, Iran, and Italy also have a level 3 warning from the CDC to avoid all non-essential travel.
  • The Japanese government recently implemented that arrivals from South Korea have to self quarantine themselves for two weeks once they arrive in Japan. In response, the South Korean government halted the 90-day visa free entry programs for Japanese and also implemented the same self-quarantine measures for arrival from Japan, deepening the ongoing diplomatic tensions between the two countries.

The impact of COVID-19 on the South Korean Hotel Sector

  • In February, China’s occupancy dropped 75.9%, reaching an absolute level of 14.0%. Singapore also dropped by 46.9% to 46.4%; South Korea dropped 30.0% to 42.7%; and Japan fell 22.4% to 64.7%.
  • In February, RevPAR at Marriott hotels in Greater China dropped almost 90% compared with the same period last year. "Effective February 26, 2020, we are also waiving cancellation fees for guests with reservations at our hotels in South Korea, Japan and the Milan (Lombardia region) and Venice (Veneto region) regions of Italy for hotel stays through March 15, 2020. Additionally, we will waive cancellation fees for guests in mainland China, Hong Kong SAR, Macau SAR, Taiwan, South Korea, Japan and the Milan."
  • Guests traveling to or from Greater China, South Korea or Italy with direct bookings for stays in any of our hotels through March 31 will have their cancellation or change penalties waived". Stated Marriot Hotels.
  • In South Korea, since the number of cases began to stabilize around March 10th, direct bookings have been steadily growing with hotels taking advantage of a similar increase in domestic travel seen elsewhere in the region.

Research Strategy

Your research team began the research into reliable sources like The diplomat, Exchangewire, TravelDailyMedia, HotelBusiness, and Triptease. On these websites was possible to find all the information required. Some data was backed up with information from Statista website.
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Part
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COVID-19 Impacts on Finance - South Korea

As a result of the pandemic, the shares of financial firms in South Korea are declining, banks' credit profiles became uncertain due to their exposure to the most impacted industries, asset management firms face a number of difficulties with their global real estate investments, and. Also, the government announced its plan to relax the foreign exchange liquidity ratio for banks and declared that it is prepared for temporarily reduced foreign exchange reserves.


Relaxing FX Liquidity Rules

  • In March, the South Korean government announced its plans to relax the foreign exchange (FX) liquidity coverage ratio for banks.
  • At the time, the ratio was 80% and the government planned to decrease it to 70% until the end of May.
  • The idea behind the temporary change is that with a lower FX liquidity ratio, banks will be able to support local markets by supplying more dollars into them.
  • With relaxed rules, banks "will be required to hold less of easy-to-sell foreign assets that can readily be converted into cash in times of stress."
  • Kim Yong-beom, the country's vice minister of finance, also stated that the government is prepared for temporarily reduced FX reserves due to the fact that they will be used to aid financial institutions and companies with liquidity shortages.
  • Importantly, there was no news about the relaxed rules coming into effect in the media. Therefore, it is unclear if the change has already been implemented.

Banks' Exposure to the Most Impacted Sectors

  • According to the report by Fitch Solutions, 14% of South Korean commercial banks' loans are dependent on the sectors that are the first to be impacted, including tourism, offline shopping, education, entertainment, and transportation. The chart below illustrates the exposure.
  • Depending on how long the pandemic lasts, credit costs could rise significantly in the broad service and manufacturing sectors. Together, they make up 58% of all loans.
  • A different analysis by the Financial Statistic Information System of South Korea names manufacturing, hotels and restaurants, wholesale and retail, and transportation as potentially most impacted sectors. According to them, among the 14 largest banks in the country, between 29.3% and 75.2% of total loans are exposed to them. The chart below illustrates it.
  • Also, as of Q32019, corporate loans to the most impacted sectors by the four largest banks in the country — KB Kookmin Bank, Shinhan Bank Co. Ltd., KEB Hana Bank, and Woori Bank — were worth 215 trillion South Korean won ($256.7 trillion).
  • Those figures mean that the longer the COVID-19 pandemic persists, the more likely it becomes that the country's commercial banks will be impacted by rising credit costs and lower loan quality. It is especially true for institutions that don't have large franchises and "limited regional concentration."
  • According to the report by Fitch Solutions, it is hard to predict how their credit profiles will change in the short term. It is dependent on how the pandemic evolves and how the government keeps responding. However, it is expected to have some impact.
  • Still, analysts think that major South Korean banks will be able to remain relatively stable during and after the pandemic thanks to strong Tier 1 capital ratios, which are above the global average.


Difficulties for Asset Management Firms

  • In recent years, asset management firms from South Korea have made significant investments in the global real estate market.
  • According to The Investor, they made several multibillion-dollar deals that are now at risk due to the pandemic. It has already become more difficult to attract further investments, secure loans, and conduct property evaluations.
  • At the same time, asset management firms are pressured by global lenders to pay back debts in dollars, while not being able to sell parts of their assets as investors aren't willing to take risks.
  • An example of a large deal by a Korean asset management firm is the one between Chinese Angbang Insurance Group, Korean Mirae Asset Financial Group, and Goldman Sachs. Mirae Asset was supposed to acquire 15 luxury hotels in the US, with a total worth of $5.8 billion.
  • However, according to market analysts, it may not only be difficult to finance the project but also for it to remain profitable, considering that the hotel sector is one of the most impacted.
  • According to The Investor, several other Korean asset management firms expect to be impacted. For instance, KB Securities waits for how their current investments will develop and closely watches foreign exchange rates.

Impact on Pension Schemes and Savings Funds

  • According to the Korea Economic Daily, pension schemes and savings funds in the country have been flooded with capital calls from international investors.
  • In the short term, it disrupts their daily operations by adding unexpected paperwork and multiple conference calls.
  • Instead of making capital calls in two or three installments and using "low-interest bridge loans from banks before closing a fund to boost internal rates of returns," foreign investment firms now turn to their limited partners (LPs) to meet the acquisition price to avoid relying on bank loans.
  • At the same time, investment units of pension schemes try to deal with unspent cash, as most new investments are on hold.
  • The same article predicts that it is unlikely that the country's LP investors will give new capital to local private equity funds, as most of the government support has been directed at small businesses and financing possibilities from financial institutions decreased.

Declining Shares of Financial Firms

  • According to an article published in Vietnam Investment Review in early March, in South Korea, "shares of financial firms tumbled."
  • For example, Shinhan Financial Group lost 2.05% as of February 26.
  • For the same period, KB Financial's shares declined by 2.17%.
  • The article notes that the decline can be contributed to the potential impact of pandemic-related disruptions in travel, supply chains, and other sectors, as well as to the overall uncertainty over how the country's economy will recover.
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COVID-19 Impacts on QSR - South Korea

The impact of COVID-19 pandemic on the South Korean QSR industry includes increased reliance on drive-thru services, reduced restaurant operations, increased focus on readymade meals, growth in takeout and delivery services, government incentives and subsidies, and social distancing measures.

Increased Reliance on Drive-Thru Services

  • In South Korea, drive-thru food services were mostly operated by foreign fast-food chains like McDonald's and Burger King. However, due to the COVID-19 crisis in February, many consumers favored non-face-to-face services for order deliveries.
  • Starbucks Korea's drive-thru orders jumped by 32% over the previous year, with about 40% of consumers using the MY DT Pass app service to skip the payment process with automatic charging.
  • McDonald’s Korea reported that its drive-thru services have catered to more than 10 million cars in the first quarter of 2020.
  • Local restaurants started offering prepackaged full-meal combos of "Doeji Guk-bap" and "Galbi" to customers in the city of Daegu, the epicenter of coronavirus in South Korea. Drive-thru meal services gained popularity among consumers seeking swift and convenient service.
  • This service was even adopted by local fishermen selling prepackaged fish portions in the city of Pohang. Further, the success of drive-thru delivery services led to similar services being launched in Seoul markets for the delivery of fresh crop produce and even books.

Reduced Restaurant Operations and Increased Focus on Readymade Meals

  • In Seoul, about 1,600 eateries and bars went out of business from March 1 to 20 due to the coronavirus crisis. The businesses comprised 274 traditional Korean restaurants, 83 fried chicken joints, 73 western-food restaurants, and 108 cafe bistros.

Growing Number of Takeout and Delivery Orders

  • According to food delivery service provider Yogiyo, the number of deliveries increased by 11% from Feb 1 to 16, growing by 3-4% every week from Jan 20. Alternatively, Baedal Minjok (Baemin) reported that its food delivery orders increased by 9% from Jan 31 to Feb 17 compared to Jan 3 to 20.
  • Starbucks Korea’s Siren Order, an on-the-go ordering service, surpassed 8 million orders between January and February, registering a YoY increase of 25%.
  • Lotte GRS restaurants launched the Lotte Eats app in February, enabling customers to place orders from its branded outlets of Lotteria, Krispy Kreme Doughnuts, Angelinus, Villa de Charlotte, and TGI Friday’s via the app.
  • Shinsegae Food's No Brand Burger registered a dramatic rise in takeout orders, accounting for 32% of total sales in January, 41% in February, and 47% in March 2020.
  • Lotteria is the largest hamburger chain in South Korea. In the first quarter of 2020, the company reported a drop of 13% in dine-in customers and a jump of 30% for delivery orders.

Government Incentives and Subsidies

  • The South Korean government announced a cut of 0.5 percentage point in its rate for special loans given to local restaurants, currently set at 3%.

Social Distancing Measures

  • On March 23, Starbucks Korea announced to adopt social distancing measures across all its stores nationwide. The retail outlets featured safety line stickers for customers to maintain adequate distance from staff while placing orders. The company also placed tables and chairs at a distance of 1.5 meters apart from each other.
  • Starbucks first implemented its social distancing measures in the city of Daegu and North Gyeongsang Province. Additionally, the company temporarily banned the use of personal mugs and tumblers by customers.
  • According to Yogiyo, a 13% increase in the number of customers requesting to leave their orders at the door was noted to avoid contact with the delivery man compared to a month ago.
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Part
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COVID-19 Impacts on Retail - South Korea

Local retail stores in South Korea have reported a sharp decline in foot traffic and sales since many consumers are avoiding public areas to reduce the risk of infection. Consumer spending has been further impacted by a number of closures of retail complexes and consumer-facing facilities in response to the COVID-19 outbreak. A large majority of customers have shifted to online shopping, while supermarkets and convenience stores have been able to maintain a steady growth rate fueled by the demand for food and necessities. Department stores and discount outlets, as well as duty-free shops have been the worst impacted by the outbreak.

Online Retail

  • Retail in Asia has reported that online purchases during week 6-8 of 2020 increased by four times compared to week 1-3 before the COVID-19 virus spread across South Korea. It further states that online shopping channels have maintained a growth rate of 30% since week 6, attracting customers from offline stores.
  • According to a news article from Xinhuanet, online shopping hit a record high in March 2020 reaching 8.99 trillion won (USD 8.36 billion), a 20.1% increase from the previous year. Online shopping via mobile increased by 31.4% during the same period, accounting for 60.2% of the total online shopping during the month.
  • Outlook news states that online sales of food items almost doubled in February as consumers stayed indoors due to the pandemic. Food sales from online retailers increased by 92.5% in February compared to a year earlier, while household items sales grew by 44.5% driven by the demand for hygienic items.

Supermarkets and Convenience Stores

  • Retail in Asia states that according to data from Nielsen Korea, brick-and-mortar stores such as supermarkets and convenience stores saw an increase in purchases of 10% on average during week 6-8 2020.
  • Privately-owned big supermarkets saw the strongest growth with triple the purchase value during the period. More than half of its buyers were those that used to shop at big box stores.
  • The Yonhap News Agency has reported that local convenience store sales had increased by 7.8% with more people buying daily necessities, including pharmaceuticals.

Duty-Free Shops

  • The Korea Herald has reported that duty-free stores in South Korea will see a sharp decline in sales with a reduced number of visitors, especially from China. Inside Retail confirms this finding and states that based on analyst predictions, the new coronavirus may cause up to a 70% fall in both Chinese inbound travelers and duty-free companies’ sales.
  • According to the Korea Duty-Free Shops Association (cited by Inside Retail), in the first week of February, the combined sales of duty-free companies have dropped by 30% year-on-year and by 50% quarter-on-quarter. This is in stark contrast to the 25% growth experienced during the previous month.

Department Stores and Discount Outlets

  • Outlook news has reported that amidst the coronavirus outbreak, the revenue of department stores and discount outlets has dropped by 21.4% and 10.6% respectively. Another news source states that the lower sales volume in department stores was due to the weak demand for fashion items.
  • Local brokerage analysts expect a steep decline in the retail industry in South Korea due to the rapid spread of the virus. The stock prices of department stores Lotte Shopping and Hyundai department dropped by 5.17% and 5.1% respectively amid public fears over COVID-19.
  • Several department stores and large discount stores have mandatorily closed temporarily, and top department stores are under pressure to clear seasonal stocks which dropped by 10-20% during the past two months. Stores are running various promotional programs to attract customers while spreading out visits to minimize health risks.

Other Findings

  • The Yonhap News Agency has reported that the coronavirus has dealt a "heavy blow to the already-struggling retail industry, prompting companies to close brick-and-mortar stores to reduce fixed costs." Stock market experts state that the market is "unlikely to make a speedy rebound."
  • An article from Inside Retail states that according to brokerages, due to the higher spreading rate and stronger quarantine regulations "the retail sector is bearing the brunt of the coronavirus scare, even more so than the Mers and severe acute respiratory syndrome (Sars) outbreaks."
  • However, the combined revenue of 26 major online and offline retailers across South Korea had increased by 9.1% in February 2020 compared to the previous year. This was due to the significant growth in online sales (despite the dip of 7.5% in offline sales) which increased by 34.3% as South Koreans avoided crowded places and face-to-face contact during the pandemic. This was the strongest growth in online sales since June 2016.



Sources
Sources

From Part 01
Quotes
  • "emergency loans and guarantees for microbusiness owners, the purchase of arrears, and adjusting liabilities."
  • "emergency relief payment to households with income levels that fall in the bottom 70%."
  • "online and offline gift certificates issued by local governments."
  • "an extreme personal travel or movement restrictions, or closed its airports or took other authoritarian actions."
  • "special entry procedures to all travelers and is requiring a 14-day self-quarantine or isolation in facilities for all travelers entering Korea from April 1"
  • "the self-diagnosis app to update their health status."
  • "their suspected symptoms, their locations, and compliance with the quarantine guidelines."
  • "low possibility of infection via surface contact, which allows quick and safe collection of samples from a large number of people."
  • "every 30 minutes to allow time for disinfection and ventilation."
  • "the Monetary Policy Board of the Bank of Korea decided to lower the Base Rate by 50 basis points from 1.25% to 0.75%, effective March 17."
  • "decided to lower the interest rate on the Bank Intermediated Lending Support Facility from 0.50%-0.75% to 0.25%"
  • "the forex futures trading limit by 25% to 50% for local banks and 250% for foreign bank branches from March 19."
  • "an equity market stabilization fund - a temporary fund jointly invested by the financial sector, designed to be invested in equity index products."
  • "a temporary bilateral currency swap arrangement (swap line) to provide U.S. dollar liquidity"
  • "to help provide sufficient liquidity to businesses and deploy market stability tools to absorb shocks in the financial markets amid the spread of COVID-19."
  • "decided to supply unlimited liquidity to financial institutions as part of its efforts to combat the coronavirus pandemic."
Quotes
  • ""offer 50 trillion won ($40 billion) of an emergency financial aid package for small businesses, microbusiness owners and the self-employed."
From Part 04
Quotes
  • "Kai motors to suspend production at three of its 9 vehicles assembly plants in South Korea due to sharp fall in global vehicle demand due to the covid-19 pandemic Hyundai motors have also suspended its vehicle production. Overall the exports of built up vehicles from south Korea fell by 17.6% to 479, 388 units in the first three months of 2020."
Quotes
  • "South Korean SUV manufacturer Ssangyong motor company plans to sell off noncore assets in order to remain in business after its parent company Mahindra canceled its turn around plan for the company due to the escalating COVID-19 pandemic."
Quotes
  • "Hyundai Motor said it will suspend production in South Korea, its biggest manufacturing base, becoming the first major automaker to do so outside China due to disruption in the supply of parts resulting from the coronavirus outbreak. Most of Hyundai’s South Korean factories will be fully idled from Feb. 7, while some production lines are expected to restart on Feb. 11 or Feb. 12, a union official said, declining to be identified given the sensitivity of the matter."
Quotes
  • "Automotive companies in South Korea are forecasted to see the largest loss in their annual sales revenue due to the coronavirus (COVID-19) outbreak. The forecasted loss in sales revenue among automotive companies was 13.9 percent and it was followed by auto parts industry with 12.8 percent and petroleum products industry with 12.4 percent."
Quotes
  • " The auto sector has been facing disruptions of supply chains across various continents. The Hyundai Motor closed its Montgomery, Alabama, assembly plant on Wednesday after an employee tested positive for Covid-19. It also suspended production at its plants in the Czech Republic and India due to the coronavirus outbreak. Europe and the United States account for about 70 percent of Korean automakers' exports, and 54 percent of Korean parts exports. The Covid-19 pandemic has led to shutdowns at auto factories and dealerships in many countries across the United States, Europe and Asia. These plant shutdowns are affecting South Korean automakers like Hyundai Motor Co and Kia Motors Corp too."
Quotes
  • "The automotive industry, for example, has seen imports fall by nearly 40 percent this year."
Quotes
  • "Automotive production tumbled 27.8 percent in the month as the virus spread around the world caused the global supply disruption. It was the fastest diminution in about 13 and a half years. "
Quotes
  • "The pandemic has also caused a slump in South Korea's multi-billion-dollar car manufacturing industry. A statement by Korea Automobile Manufacturers Association said that the country’s carmakers and auto parts firms will suffer a cash shortage of at least $23 billion if the coronavirus situation continues for the next four months."
Quotes
  • "South Korean automotive industry giants such as Hyundai, Kia, GM Korea, SsangYong Motors halted production in some of their factories due to parts shortage as plants located in China stopped operation to prevent virus spread and contamination. "
Quotes
  • "OVID-19’s impact on the automotive supply chain may be substantial. Countries that have been heavily impacted by the outbreak, in particular, China, Japan and South Korea, account for a significant share of global auto manufacturing The deeper into the supply chain, the greater the impact of the outbreak is likely to be. Automakers with global supply chains are likely to see tier 2 and especially tier 3 suppliers most affected by pandemic-related disruptions. While many major automotive original equipment manufacturers (OEMs) have instant, online visibility into top-tier suppliers, the challenge grows at lower levels. Issues the automotive sector might face: Automakers and their suppliers employ about 1 million people in the US, according to the Bureau of Labor Statistics. These employees’ welfare should be the top concern for corporate leaders. A significant share of those people do jobs in factories where components and vehicles are assembled and so cannot be performed remotely. If infections spread and a large percentage of the workforce gets sick, it could drastically reduce production capacity. That means keeping the big picture — a safe, healthy workforce — in focus may also be what’s right for the bottom line. "