Retail Around the World: North Korea

Written by  //  March 5, 2012  //  Posts, Retail Around the World  //  Comments Off on Retail Around the World: North Korea

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Officially, all commerce in North Korea is tightly controlled by the government who “theoretically” provides its people with basic food provisions, clothing, and housing.   However, it is quickly apparent while riding the train over the border from China that those with means are acquiring goods in other ways.  The Koreans who board the train all carry incredible amounts of merchandise with them, literally filling their sleeping compartments to the brim.  Two unfortunate fellow travellers made the mistake of going to the bathroom during this boarding process, only to return to find their beds covered in TVs and rice cookers.

My first experience with North Korean retail was at Sinujiu Station just over the Chinese border.  A small kiosk for tourists in the train station sold a variety of bizarre souvenirs, drinks, and translated books.  The purpose of some of these books was understandable, such as the popular “The US Imperialists Started the Korean War” which you can actually read online.  Others clearly had been sitting on the shelf for years, such as a North Korean guide to Windows 3.1 (I purchased a copy in Wonsan).  Another immediate observation was the complete lack of “customer service”.  With absolutely no incentive for the shopkeeper to make a sale, she wasn’t exactly in a rush to attend to our group who were anxious to make their purchases with Chinese currency before the train left.  Patience and a little bit of persistence were necessary.

On arrival in Pyongyang, my first impression was that there was an incredible amount of pedestrian foot traffic but little street retail.  Everyone seemed to be walking with a clear purpose.  Children don’t just walk to school, they march in perfect precision, singing patriotic songs.

After some time in the city, I realized there was in fact street retail, but it was hard to spot from the tinted windows of your vehicle.  Guides try their hardest to limit interactions between foreigners and locals, and I presume retail environments represent a threat.  I guess in a way that speaks to the placemaking and social function of retail!

Outside of the Koryo Hotel are some street stalls selling take-away food, and nearby you can find a number of restaurants if you know where to look.  Primarily, the restaurants we visited were designated for tourist purposes, but occasionally other locals were present.  The only places that seemed to be busy were the hair salons where middle-aged women got perms.  In North Korea there isn’t really a need to advertise your merchandise (where else are you going to go?), and as a result storefronts are pretty non-descript.  Many of the restaurants we visited, for example, looked just like the institutional buildings next door with the exception of exciting names written on the building in Korean such as “Pyongyang Number One Duck Barbeque”.  Yelp has yet to hit Pyongyang in a big way, so you might as well take the official review seriously.

Having visited the majority of department stores in South Korea, I was very interested to see one in North Korea.  The department store pictured below had retail on three levels and a small supermarket on the ground floor. Food products were imported from all over, but a few random countries such as Malaysia were the primary suppliers of goods.  Some North American products (such as Coke) were available, but I assume they are produced and imported in 3rd party countries.  No other shoppers were present in the supermarket, which probably explains why a lot of the products had expired. At the back of the supermarket was a bakery which seemed fairly active.  I purchased a carton of Pyongyang cigarettes as souvenirs (no health warning labels!) for about $5 USD.

The department store itself was doing some renovations, but most areas were still open with goods displayed.  There were no other customers, and our only interactions with the staff were when they would catch us taking photos.  Products on display were mostly imported from China and seemed very expensive.   (NKW’s official exchange rates are very different from their actual value which fluctuates)

 

 

 

 

 

 

 

Altogether the store was fairly depressing, but not too far removed from some of the older un-renovated department stores in South Korea (which are equally depressing in my opinion).  A video which shows some of the merchandise available was filmed at Pyongyang Department Store No. 1 by the government.  The fact that the government thinks that videos like this are having a positive propaganda impact illustrates just how insular and isolated North Korea really is.

A commodity exhibition was opened at Pyongyang Department Store No. 1 recently.  On display at the exhibition are more than 3.5 million goods of over 1 400 kinds presented by industrial establishments in Pyongyang and local areas….  The exhibition showing the development of the country’s light industry would contribute to improving the people’s standard of living.

I seriously doubt many locals shop frequently at these stores, even if they are affluent enough to be able to afford it.  It’s simply just a bad deal – better goods can be obtained more cheaply from other sources.

Other interesting retail venues we visited included a number of art galleries where you could buy good quality pieces cheaply.  North Korea keeps hundreds of skilled artists on state salaries.  Some of this undoubtedly feeds into the propaganda machine, but most images were of nature or in traditional Korean style. I have a fantastic traditional water colour print framed in my living room which I purchased for $60 USD (my amazing deal was ruined on my return home when I found out that framing it would cost 8 times that!).

So where do North Koreans really go to shop?  Obviously the government does not admit that free market capitalism is happening on a large scale, so tourists are isolated from these activities.  The official per capita income from government salaries is estimated at $2 per month. Actual income, including activities from small businesses and private farming, is estimated at $15 per capita.

I was told that during the famines in the mid-1990s the government was unable to provide basic necessities to people.  To survive, many North Koreans turned to illegal private market activities to supplement their income – making whatever they could and selling it.  The devoted hard-liners who shunned these activities were completely dependent on the government for food supplies.  When the government failed to provide, many starved to death.  Ironically, this left a situation where the “deviant” North Koreans managed to survive the famines while the hard-liners were partially wiped out.  This transition weakened the government’s control on the market and forced them to make concessions. Semi-legitimate markets appeared in cities across North Korea, serviced by Chinese traders and local entrepreneurs. For more on economic changes in North Korea over the past 20 years: North Korea’s new class system.

In 2010, the government tried to reign in the increasingly powerful “capitalist” sector by devaluing their currency to wipe out private savings.  Effectively, every dollar held by North Koreans was now worth one cent.  Big mistake.  North Koreans protested in the streets and the government went into crisis mode, responding the way it knew best; shooting the 77 year old finance chief who supposedly recommended the strategy.

The markets are back open for business, but this time things are different according to The Chosunilbo.  Before the currency reforms, government security agents used to closely patrol markets, hassling those who were conducting unsanctioned business (such as selling South Korean products).  After the reforms, “traders apparently hurl abuse at any security agents attempting to crack down”.  South Korean products are in high demand, particularly cosmetics, mobile phones, TVs, and rice cookers.  In a sign that the North Korean government is increasingly losing its cultural control, South Korean DVDs and CDs are freely available under the table.

It is not just the black market which is becoming increasingly formalized.  It is now possible to open a bank account in North Korea and receive a debit card.  Foreigners are able to do this quite readily while in the country – in fact I know a few people who are now the proud holders of a Koryo Bank debit card.  I’m fairly certain they are not transferring their life savings over quite yet however.  The government is also increasingly willing to enter into business partnerships with foreigners.  At least if you have capital to inject, government officials are willing to talk.  I’m referring to legitimate legal businesses, like running a restaurant – not the shady business which has already been taking place for years.

The demand for luxury products by the ruling elite has boomed despite international sanctions.  Everyone was aware of the late Kim Jong Il’s taste for luxury products, but numbers wise it appears North Korea as a whole is seeing a rapid increase in related imports.  This trend is counter to the continuing reliance of millions in the country on foreign food aid.  Recently, the UN estimated that only 4% of households were eating properly.  A growing demand for luxury imports is also a clear sign that UN sanctions are proving ineffective.

In November 2011, online media had a field day reporting that Pyongyang’s first luxury store had opened, supposedly selling Chanel and other high end brands.  Chanel even came out and said they had no affiliation with the new store.  As common with information on North Korea, this is another case of people looking for a sensationalist story.  The “luxury store” being referred to is actually the Pothonggang Department Store which received an official visit from Kim Jong Il way back in December 2010.  Here is the translated media release from the DPRK government:

The Pothonggang Department Store was built on the banks of the River Pothong in Pyongyang. The shopping mall has a total floor space of several thousands of square meters. All its business activities ranging from warehousing to selling are digitalized. The supermarket sells cosmetics, household articles and daily necessities on the first floor, grain, meat, vegetables, essential foodstuffs and processed foodstuffs on the second floor and household electric appliances, clothes and furniture on the third floor. It has another building for seafood. General Secretary Kim Jong Il visited the store in December last year and called on it to play a big role in improving the living standard in the city.

I’m sure it sells products classified as luxury goods under international sanctions, but generally there is little difference between this store and those which have existed for years prior.

Images of Pothonggang Department Store:


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