style and tradition, then these are your shopping destinations. Collectively, the domestic department stores of the three companies brought in net sales of 1.9 trillion KRW ($2.1 billion) in the first quarter, compared with 1.7 trillion KRW in the same quarter a year ago, an increase of 12 per cent. (Net sales include only what the department store companies book themselves and are only a fraction of total sales made in the stores. For example, Shinsegae’s net department store sales were a little more than a third of the value of all its department store transactions.)  Particularly encouraging about these results in the early going of 2022 is that they are partly based on a surge in apparel sales, a category in which department stores worldwide have been losing traction in recent years – a key factor in the decline of the sector outside of Korea. Shinsegae, which had first-quarter net sales in its department stores of 585 billion KRW, performed particularly strongly and outpaced the sector as a whole. It experienced year-on-year sales growth of 18.7 per cent and operating profit growth of almost 50 per cent, the latter again due partly to the fact that apparel is a higher-margin business than other departments. What’s driving the surge? Retail sales are off to a flyer in Korea so far this year. Total retail sales in the country were up 7.7 per cent, year-on-year, in the first quarter, Statistics Korea data shows. More significantly, sales in January-March were well above the level of early 2019 (+15.1 per cent), the last ‘normal’ first quarter of trading.  The caveat on these numbers is that some of the increased revenues are being driven by prices sneaking up, particularly in food and household goods. This is a feature of retail everywhere in the world right now and it is likely to be sustained for some months. The Consumer Price Index was up 4.8 per cent in April, which doesn’t seem too bad until you see that it is double what it was as recently as September 2021, with food and household goods particularly affected in the retail sector.  Prices for clothing and footwear – both staples of department stores – have been quite stable though, partly because it is much harder for retailers to pass on price increases in those categories and because of contracts locked in earlier at lower prices. As evidence for the potential of prices to rise further, the Producer Price Index for apparel (a proxy for wholesale prices) was up 7.3 per cent in March, an indication that retail prices may follow soon. But the strong performance of retail generally and department stores in particular in 2022, a trend that carried over from last year, isn’t all or even mostly about prices. Koreans haven’t been getting out much because of international travel restrictions so a lot of that extra cash is being splashed in department stores, especially by those at the high end. The leading department store operators have seized eagerly on the opportunity by renovating and devoting more space to upscale brands. At one point last year, Shinsegae’s store in Gangnam in the south of Seoul devoted five floors to a Louis Vuitton pop-up shop (the Gangnam store is the highest-grossing department store in Korea and among the largest in the world). And here is more good news: a lot of the splashing on luxury goods – close to half of it – is being done by shoppers in their 20s and 30s, indicating that, at least in Korea, the department store format is not just appealing to older customers, who are often shopping and purchasing less.  The big picture The big winners over the past three years are e-commerce retailers, whose sales are up a whopping 51.6 per cent from the first quarter in 2019. Market share of retail attributable to e-commerce has risen from 16.9 per cent to 22.2 per cent. For department stores specifically, sales were up 16.7 per cent over the first quarter a year ago and 19.2 per cent above the first quarter of 2019. Department stores have enjoyed a slight increase in market share, from 6.6 per cent to 6.8 per cent over the three-year period. Not everyone has been a winner. Specialty stores have suffered a decline in market share, from 29.6 per cent to 25.4 per cent, although they look to be getting back on track with a 10.6 per cent year-over-year sales gain in the first quarter.  Understandably, it’s been an abysmal couple of years for duty-free shops because of the international travel curbs. Better times are ahead, though, as travel reignites.  The road ahead Department stores in Korea are bucking global trends by performing strongly, appealing to younger shoppers and opening new units. Moreover, the major companies are part of conglomerates that are involved in a variety of retail channels, including e-commerce, so these are not being left behind when it comes to technological innovation.  Better yet, Korea is a country where beauty and personal appearance are critically important and consumers spend a fortune on beauty products, which plays to one of the traditional strengths of department stores. These are all reasons for cautious optimism. However, significant challenges remain. Korea is an intensely competitive retail market where shoppers spend a large and growing percentage of their money online. The online marketplaces are immensely popular and Korea, through innovative companies like Coupang, is at the cutting edge of digital commerce.