Korean shopping mecca Dongdaemun Market's vacancy rates soar

Store vacancy rates in South Korea’s largest shopping mecca Dongdaemun Market have soared to as high as 86%, with Chinese e-commerce platforms pushing them further to the margins.

The fashion town in Seoul had long attracted young shoppers in their 20s and foreign tourists in search of cheap trendy clothes. But it has lost its luster since the mid-2000s amid the rise of online shops.

Making matters worse, Chinese e-commerce players such as AliExpress, Temu and Shein are even eating away at Korean offline malls' share in the ultra-cheap clothing market.

Korean cheap clothing manufacturers retain comparative advantages over Chinese products in terms of quality and design. But the gap is being rapidly narrowed, said fashion industry officials.

As of the end of March, the vacancy rate at 14 of the 32 shopping malls in the Dongdaemun fashion district reached the double digits on average, according to the Dongdaemun Fashion Town Special Tourism Association.

The vacancy rate at the Maxtyle shopping mall, which accommodates 2,654 stores, stood at 86%.

Vacancy rates at two other fashion malls, Designer Club and Good Morning City, stood at 77% and 70%, respectively,

“More than half of the clothes distributed in Dongdaemun have been replaced by Chinese products," said a fashion industry official.

“You can order similar clothes at low prices from AliExpress and Temu, so who would visit Dongdaemun?”

Dongdaemun Market used to be crowded with retailers chartering buses from all over the country to buy in bulk. But those days are gone.

China’s ban of group tours to Korea in retaliation for Seoul’s decision to deploy the Terminal High Altitude Area Defense (THAAD) in 2016 and the COVID-19 outbreak dealt heavy blows to Dongdaemun Market.

Even with the lifting of the travel ban and the pandemic's end, there are few signs of recovery in the fashion town.

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

RENT-FREE LEASE

A shop operator in the fashion town said that landlords offer rent-free leases on the condition that tenants only pay the management fees, but still find it difficult to find tenants.

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

Linkshops, a domestic wholesale fashion platform founded in 2012, went out of business earlier this year due to a drop in transaction volume.

It was the first platform that connected wholesalers and retailers in Dongdaemun and had received close to 20 billion won ($15 million) in investment from a venture capital firm.

Gollala, another wholesale platform based in Dongdaemun, shut down last year.

To revitalize the area, some fashion industry officials suggest that cultural facilities be built in the fashion town, which would need the nod from several hundred store owners in the area.

Given the difficulty of winning the approval of a majority of shop owners there, Ji Dae-shink, a director of the Dongdaemun Fashion Town Special Tourism Association, proposed a revision of law to convert the commercial district into a mixed-use area.

Write to Ji-Yoon Yang and Hyun-Jin Ra at yang@hankyung.com
Yeonhee Kim edited this article