The area around the Namdaemun Market in Jung-gu, Seoul was quiet on the 22nd, just before the Lunar New Year holiday. Since early December last year, the high exchange rate has continued, leading to a significant drop in customers. Retailer Choi (52) selling imported goods said, “Even if I give up half the margin, I have to sell at higher prices than two months ago due to the rising exchange rate. How can I expect customers to come?” He noted, “Some people understand the high exchange rate situation, but most turn away saying, ‘Why has everything become so expensive?’
◇High exchange rate raises expenses while sales decline, creating 'double trouble'
There are several import stores in Namdaemun Market. These include the Sungnyemun Import Store focused on miscellaneous goods, the Namdaemun Import Store specializing in glasses and watches, and the Credit First Import Luxury Store centered on miscellaneous and health supplement products.
Here, wholesalers and retailers are waiting for customers with various imported products stacked in spaces just over one pyung. The ability to verify unique and diverse imported products visually and purchase them at relatively low prices has been considered an advantage. Even in the current age of active online shopping, these factors have kept customers coming to the Namdaemun import stores.
However, recently, customer visits have dropped sharply. The rapid rise in the won-dollar exchange rate has had a significant impact. Before the declaration of martial law on November 29 last year, the dollar traded at 1,396.5 won, but by December 31, it reached 1,477 won. It seemed to stabilize around the 1,430 won range in late last month, but when the foreign exchange market opened on the 31st after the Lunar New Year holiday, it surpassed 1,450 won. It increased by 3.9% in two months.
Most of the products handled by the Namdaemun import stores go through a supply chain of importers, wholesalers, intermediaries, and retailers. The effects of the high exchange rate spread sequentially from importers to retailers. It now costs more than before to import goods, while the volume sold is lower than in the past, resulting in a situation where expenses are increasing and sales are declining—creating a double burden.
◇“It’s a thing of the past when customers could fill a basket for 100,000 won”
Namdaemun import store merchants said the rapidly rising exchange rate is making their situation increasingly difficult. Wholesaler Kim (47) stated, “The inventory we brought in when the exchange rate was decent has run out. After the martial law, the prices of goods that soared due to the high exchange rate would have been fully reflected in retail prices.”
Retailer Kang (40), who handles food products at the Credit First Import Luxury Store, remarked, “As the exchange rate rises and prices go up, the purchase rate declines,” adding, “In the past, buying worth 100,000 won would fill a basket, but now it doesn’t feel that way, so customers aren’t satisfied. Since we can’t place orders with our middleman due to low sales, it creates a vicious cycle.”
Kang was selling imported chocolates bought at 3,600 won each for 4,000 won. Two months ago, he acquired the same product for 3,300 won each. “That said, I can’t just increase the chocolate prices,” he emphasized, maintaining retail prices, but overall, the rise in prices at import stores has led to fewer sales, he said. Regular customer Park Sang-hyun (54) noted, “There are many unique vitamins and interesting foods, so I often visit Namdaemun Market, but it’s clear that prices have increased.”
◇“One transaction costs 2 billion won, but with the exchange rate soaring, it cost an additional 200 million won, causing my house to be used as collateral.”
The fact that they need to buy goods from overseas at higher prices is also a concern. Shim (56), who runs an import business, stated he had to take out a loan using his house as collateral due to the high exchange rate. Shim imports dental irrigators from the United States twice a year and supplies them to retailers. It costs about 2 billion won to import each time, but due to the soaring exchange rate, the cost to bring in the same amount has significantly increased.
Shim said, “To meet the required quantity, I needed an additional 200 million won. How many people have that kind of spare capital?” and added, “Recessions, martial law, and impeachment, it’s just exhausting. After this transaction, I told the U.S. headquarters, ‘I can’t do this anymore.’” He continued, “Even after making an effort to bring in goods, sales don’t go well these days since everyone's financial situation is tough, so I worry about my business, staying awake every night and taking sleeping pills to finally fall asleep.”
Meanwhile, retailer Choi noted, “When the exchange rate rises by 2%, the wholesale price goes up by about 20%, and consumer prices leap by 30-40%. With the long recession and the unease created by martial law, the situation is at its worst, and the biggest problem is that there are no signs of resolution.”
According to the price index for exports and imports released by the Bank of Korea on the 15th of this month, the import price in won terms rose by 2.4% compared to the previous month and 7.0% compared to the same period last year. Compared to a year ago, the price of imported coffee rose by 95.4%, and imported beef increased by 18.7%.