The number of self-employed businesses in Seoul has fallen by about 39,000 over the past two and a half years, as prolonged high inflation and high interest rates following the COVID-19 pandemic squeeze neighborhood shops, one of the weakest links in the economy.
Seoul had 624,791 self-employed businesses in the second quarter, down 38,682 from 663,473 in the fourth quarter of 2023, according to the Seoul Metropolitan Government's commercial district analysis service on the 4th. The figure peaked in the fourth quarter of 2023, after the pandemic ended, and has declined for 10 consecutive quarters through the second quarter of this year. Because the data represents a net decline that already accounts for new openings, the actual number of closures is estimated to be higher.
The drop was steeper in outlying districts of Seoul, where shops depend on spending by local residents. Eunpyeong District posted the sharpest decline, with the number of shops falling 9.03% to 19,491 in the second quarter from 21,425 in the fourth quarter of 2023. Gangbuk District followed at -8.66%, ahead of Jung District at -8.51%, Nowon District at -8.25% and Guro District at -7.72%. Central districts that draw heavy foot traffic and foreign tourists saw smaller declines, including Jongno District at -2.89%, Mapo District at -3.33%, Seongdong District at -3.56%, Seocho District at -4.26% and Gangnam District at -4.87%.
By business type, everyday service businesses recorded the biggest losses, including nail salons at -20.93%, internet cafes at -19.77%, real estate brokerages at -17.77% and pubs and small bars at -17.15%. Skin care salons rose 39.71% and sports clubs gained 18.42%, but the increases were not enough to reverse the overall decline.
Analysts attribute the contraction to rising costs driven by high inflation combined with weak domestic demand. Experts noted that the burden on the economy is growing because people continue to open businesses out of necessity even as the sustainability of self-employment declines. "Middle-aged and older people who cannot find jobs after retirement keep flowing into an oversupplied self-employment market," said Ahn Dong-hyun, a professor of economics at Seoul National University. "Even if wage levels have to be adjusted, we need to create an employment environment where people can keep working after retirement in order to reduce survival-driven startups."
