More than 6 out of 10 small merchants said business conditions worsened in the first half of this year and expected the slump to continue in the second half. Business sentiment also clearly weakened, with many unable to even set investment plans.
The Korea Federation of Small and Medium Enterprises announced on the 16th the results of its "First-half business trends and second-half outlook survey of neighborhood-market small merchants," conducted on 505 neighborhood-market small merchants.
In the survey, 63.6% said overall business conditions worsened in the first half compared with the second half of last year, and 59.8% said conditions would worsen in the second half as well. Negative expectations also dominated key management indicators, including worsening cash flow (58.4%), declining sales (59.4%), shrinking operating profit (59.8%), and fewer store visitors (58.8%).
By industry, the outlook for sales deterioration was highest for laundries and hair salons (72.7%), real estate brokerages (70.0%), private academies (68.0%), and beer halls, bars, and street pubs (63.3%), in that order. In food service, beer halls, bars, and street pubs and general restaurants had stronger negative outlooks, while cafes and bakeries were expected to be relatively less affected by the economy.
The most common reason for a negative view of the second half was "weakened consumer capacity due to high inflation and reduced real income" (60.9%). This was followed by increased operating expense burdens such as for materials and supplies, rent, and labor (23.5%).
Whether a business was listed on an online platform also made a difference. For firms not on platforms, responses indicating worsening conditions were more than 7 percentage points higher across all items than for listed firms, suggesting that securing online sales channels helps cushion the impact of the downturn.
Weak domestic demand was most frequently cited as a management difficulty. Rising costs for materials and supplies and purchase prices of goods, and energy expense burdens such as for electricity and gas were also identified as factors. In particular, general restaurants; beer halls, bars, and street pubs; and cafes and bakeries found rising prices of materials and supplies to be the biggest burden, while the lodging industry was found to face heavy energy expense burdens.
Small merchants said expanding tax benefits (65.7%) was the most needed policy. Easing energy expense burdens (52.1%), financial support such as expanding policy funds and guarantees (43.6%), and reducing loan repayment burdens (31.7%) followed. By industry, demand for energy expense support was high in food service and lodging. Apparel, accessories, and cosmetics retailers and supermarkets had relatively higher demand for consumption-boosting policies such as consumer coupons.
Kim Hee-jung, head of economic policy at the Korea Federation of Small and Medium Enterprises, said, "Because the content of needed policy support differs by industry, customized policies that reflect the business environment and characteristics of each small-merchant sector should be pursued."