Consumers in Korea............
koreaherald.co.kr
01-15-98 : Consumers Suffer from Economic Downturn
Thousands of second-hand cars are waiting for buyers at Changanpyong, the largest car market in Seoul. Price tags
differ but all carry the same message: Bargain. But few come to buy.
In a sharp economic downturn, the car market is hurting. Due to soaring prices of virtually all other products, more and
more Koreans are giving up the convenience of owning their own cars.
The South Korean won has lost more than half of its value against the U.S. dollar in the past year. That has jerked up
the prices of products made of imported raw materials.
Ordinary Koreans are tightening their belts in response.
''I can't afford the gas any more, so I decided to sell my car that I bought only six months ago,'' said Park Hong-kyu,
38, who works for a meat distribution company.
Used car dealers in South Korea don't buy and sell vehicles; instead, they sell only on commission, and the vehicle's
owner doesn't get paid until the sale is made.
Park hoped to sell his subcompact car quickly, but his dealer said he may have to wait for weeks, or months, before he
gets his money.
''We used to sell 120 to 130 cars daily, but now we're lucky to sell 10 cars,'' said Cho Jae-sung, 34, a car dealer at
the market.
International oil prices are at their lowest in 2 1/2 years, but gasoline prices in South Korea have surged to 1,135 won
per liter from 889 won in November. Further price hikes are anticipated.
When Cho Kang-il, a 41-year old Seoul homemaker, goes to a neighborhood supermarket these days, she comes
home with a smaller load of groceries.
''Now I can buy only about two-thirds of the goods I used to buy with the same amount of money just last month,'' she
said.
Some representative price hikes:
_ A 3-kg (6.6 pound) bag of wheat flour, which cost 7,300 won in December, now sells for 10,971 won.
_ Sugar sells for 1,273 won per kg (2.2 pounds), up from 890 won a month ago.
_ The price of fresh milk has risen from 1,300 won per liter in December to 1,500 won.
Bakeries, which use mostly imported flour and sugar, have marked up their prices by 10 percent to 15 percent.
The price of both foreign and domestic beef, however, has come down. Korean farmers are slaughtering animals they
no longer can afford to raise because of the high cost of imported feed, creating a glut on the retail market.
Sales of foreign consumer goods have dropped sharply, partly because of a government-inspired austerity campaign but
mostly because many people no longer find them affordable.
Sales of imported wines, for example, have already dropped by 30 percent. A bottle of California red wine that used to
be 38,000 won is now 50,000 won.
Before the currency crisis, dealers expected that the $16-million Korean wine market would grow at double-digit rates
through at least the year 2000.
Because it no longer had many buyers, one large Seoul department store discontinued a line of imported men suits that
now sell for the equivalent of about $2,000. The currency devaluation pushed their price from 1.7 million won to 3.4
million won. The store now features a much cheaper line of domestic clothing.
Although the government is urging wholesalers and retailers to hold down price increases, it soon plans to raise the cost
of public transportation, gas and electricity.
But not all prices are rising.
Golf club membership fees have halved. Cash-strapped car companies are offering a 10 percent to 15 percent price cut
on new models. Korean car sales at home and abroad are expected to drop as much as 30 percent this year.
There also are people who benefit from the falling Korean currency.
With the value of the won falling sharply against the dollar, foreign currency buys more.
So, for example, while a 175-gram can of Nestle instant coffee has gone from 4,800 won in November to 6,800 won,
the equivalent price in dollars has fallen to $4.50 from $5.
That's because importers, fearful of losing customers, are cutting their own profit margins to try to keep price hikes as
low as possible.
Itaewon, a popular shopping area for foreign tourists, is crowded with shoppers.
''The weak Korean won certainly made shopping more fun. I'll buy coats and toys for my family,'' Bekka Joensuu, 42,
a Finnish tourist, said.
He already had bought a pair of Nike shoes for his son. The Air Jordan sneakers cost him 129,000 won ($86). The
price in won has not changed yet, but the won's value has. He would have had to pay $152 for the shoes a year ago. |
