The vacancy rate in Dongdaemun fashion centers reaches 86%

Empty store rates in South Korea’s biggest shopping mecca, Dongdaemun Market, have risen to as high as 86%, and Chinese e-commerce platforms are pushing them even further.

Seoul’s fashion city has attracted young shoppers in their 20s and foreign tourists with its trendy and cheap clothes. However, they have lost their luster since the mid-2000s with the development of online stores.

Worse still, Chinese e-commerce players such as AliExpress, Temu and Shein are eating into Korean offline malls’ share of the ultra-cheap clothing market.

Korean low-cost clothing manufacturers maintain a comparative advantage over Chinese products in terms of quality and design. But the gap is closing quickly, fashion industry officials say.

According to the Dongdaemun Fashion Town Special Tourism Association, the vacancy rate in 14 of the 32 shopping malls in Dongdaemun Fashion Town had reached mid-double digits at the end of March.

Among them, the vacancy rate in the Maxtyle shopping mall with 2,654 stores was 86%.

In the two remaining fashion centers, Designer Club and Good Morning City, the vacancy rate was 77% and 70%, respectively.

“More than half of the clothes distributed in Dongdaemun have been replaced by Chinese products, a fashion industry official said.

“Similar clothes can be ordered at low prices on AliExpress and Temu, so who would visit Dongdaemun?”

Dongdaemun Market was once crowded with retailers chartering buses from all over the country to make bulk purchases. But those days are gone.

China’s ban on group tours to South Korea in retaliation for Seoul’s decision to deploy Terminal High Altitude Area Defense (THAAD) in 2016 and the Covid-19 epidemic dealt a severe blow to Dongdaemun Market.

Even after the travel ban is lifted and the pandemic ends, the fashion district shows no signs of recovery.

Some store operators in Dongdaemun said the number of foreign buyers visiting the Dongdaemun wholesale market has dropped noticeably.

LEASE WITHOUT RENT

The operator of a store in the fashion town said landlords were offering rent-free leases on terms where tenants only pay management fees, but were still struggling to find tenants.

Korean retailers are also turning to Chinese wholesalers and e-commerce platforms away from Dongdaemun.

Linkshops, a national wholesale platform founded in 2012, ceased operations earlier this year due to a decline in transaction volume.

It was the first platform to connect wholesalers and retailers in Dongdaemun and received investments worth nearly 20 billion won ($15 million) from a venture capital firm.

Gollala, another Dongdaemun-based wholesale platform, closed last year.

To revitalize the district, some representatives of the fashion industry suggest building cultural facilities in the fashion city, which requires the consent of several hundred shop owners in the fashion city.

Given the difficulty in obtaining consent from most shop owners, Ji Dae-shin, director of the Dongdaemun Fashion Town Special Tourism Association, proposed a law change to transform the shopping district into a mixed-use area.

write to Ji-Yoon Yang and Hyun-Jin Ra at [email protected]
Yeonhee Kim edited this article