What: South Korea's middle-class spending decline persists as disposable income shrinks, creating an uneven retail recovery where low and high-income groups show resilience whilst the core middle segment struggles.

Why it is important: The middle-class spending pattern reflects deeper structural changes in consumer behaviour, forcing retailers to adapt their business models while raising concerns about long-term economic stability.

South Korea's middle class is experiencing a prolonged decline in consumer spending, marking a significant shift in the country's retail landscape. The Korea Chamber of Commerce and Industry's latest report reveals that spending has weakened primarily in the second and third income quintiles, whilst low-income households maintain spending through government assistance and high-income earners benefit from asset growth. The recovery pattern differs notably from the 2008 Global Financial Crisis, with current spending remaining below pre-pandemic levels for over three years. Rising household debt and interest payments have significantly constrained middle-class disposable income, with the marginal propensity to consume dropping from 90.8 in 2019 to 81.8 in 2024. This trend has particularly affected sectors such as clothing, footwear, and personal items, which continue to struggle post-pandemic. The situation has prompted calls for targeted policies to revitalise consumer spending and provide debt relief measures.

IADS Notes: Recent data from February 2025 reveals a stark market polarisation, with Myeongdong's 4.4% vacancy rate contrasting sharply with Garosu-gil's 41.2%. This trend coincides with department store growth falling below 1% in January 2025, forcing major retailers to seek new markets. March 2025 data shows consumers pivoting towards affordable alternatives and luxury beauty products, while online shopping has surpassed in-store sales for the first time, capturing 50.5% of the market share. The government's targeted support for low-income households, while necessary, highlights the persistent challenges facing middle-income consumers, whose reduced spending capacity continues to reshape South Korea's retail landscape.

South Korea’s middle-class spending still on a slump as financial strain grows