IKEA was onto something when it opened its first South Korean store, its largest anywhere, in late 2014.
Home furnishing chains are a bright spot in a sluggish South Korean economy, tapping demand from the rising share of people who are living alone and spending more to make their dwellings attractive and comfortable.
Local market leader Hanssem Co Ltd, with sales of more than US$1 billion in 2014, saw a 31 percent increase in revenue for the first nine months of last year and a doubling in its share price for the year as it opened 27 of its larger stores in 2014 and last year. Shinsegae Co Ltd’s Jaju chain opened 10 stores last year, bringing its total to 149.
Photo: Reuters
Swedish giant IKEA, whose single store on the outskirts of Seoul generated US$260 million in its first year, expects to spend 1.2 trillion won (US$997 million) to open five more South Korea stores by 2020 — one more than earlier planned.
South Korea is following a path seen in the US and Japan, with people spending more on home decoration as per-capita GDP rises, analysts say.
“Four or five years ago, people thought home decorating was only for rich people,” said Ock Soo, 32, who founded Webzine Rooomers and conducts decorating classes attended mostly by singles.
“Now home decoration is for everyone, as more people are living alone and for longer periods,” she said.
Home decorating shows known as “jipbang” have been proliferating on TV, including “Old House, New House” and “My Room’s Dignity,” both of which debuted in December last year.
A fast-graying South Korean population and heavy household debt, at 1.7 times annual disposable income, make property investment less attractive, prompting homeowners and renters to spend instead on making their existing dwellings more liveable. South Korea’s working-age population is set to peak this year.
“People no longer see houses as an investment, but as an object of utilization,” said Lee Gwang-soo, an analyst at Mirae Asset Securities. “People start decorating their homes because they now have to ‘live’ in them.”
Last year, South Koreans spent 12 trillion won on home interior decoration, including floors, walls, doors, kitchen and bathroom fixtures and labor, up from about 9 trillion won in 2014 and forecast to grow to 27 trillion won by next year, according to Mirae Asset Securities.
Those figures exclude furniture and off-the-shelf items, which make up the bulk of sales at retailers like IKEA and H&M Hennes & Mauritz AB’s H&M Home, and came despite economic growth that slowed to 2.6 percent last year, from 3.3 percent.
Korea Investment & Securities estimates the domestic furniture market is worth about 8 trillion won, with kitchen items counting for another 3 trillion to 4 trillion won.
The share of single-person households in the country rose to an estimated 27 percent last year from 20 percent in 2005, according to Statistics Korea, and is forecast to reach 31 percent in 2025 as younger people delay getting married and having children in the fastest-ageing industrialized country.
People living on their own spend a larger share of their incomes on consumption, including decoration.
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