‘Remove restrictions on discount stores’
Calls are growing for regulations on large discount stores to be scrapped as the restrictions are found to have failed to serve their purpose of protecting traditional markets and mom-and-pop stores, according to industry officials, Monday.
Since 2010, Korea has been restricting large discount chains, such as E-mart, Homeplus and Lotte Mart, from opening new branch near traditional markets. From 2012, the chains have also been obliged to close stores twice a month, as part of the government’s initiative to “boost” the sales of small businesses in traditional markets.
According a report from the Korea Chamber of Commerce & Industry (KCCI), however, discount stores no longer pose a threat to traditional markets, as customers tend to use online shopping or mids ize supermarkets when large discount stores are closed.
“Those regulations were created when large discount stores were in assertive expansion,” the KCCI said in the report. “With large discount stores no longer showing growth, it is time to reconsider whether the country still needs the regulations.”
According to the report, discount stores accounted for 25.7 percent of the country’s retail sales in 2012, outpacing the 11.5 percent of traditional markets.
In 2017, however, discount stores’ share declined to 15.7 percent, while traditional markets retained a 10.5 percent share. Showing rapid growth was e-commerce with a 28.5 percent share, followed by midsize supermarkets with 21.2 percent.
“With the growth of e-commerce, midsize supermarkets and convenience stores, large discount chains are facing a survival crisis,” the KCCI said.
The number of discount chain outlets in Korea showed a year-onyear decline for the first time last year, and industry leader E-mart have posted its first loss in the second quarter of this year. The KCCI also cited a survey by the Ministry of Trade, Industry and Energy, in which 27.9 percent of respondents said they don’t go shopping when large discount stores were closed. It was followed by 21.9 percent who said they will use nearby midsize supermarkets and only 12.4 percent who said they go to traditional markets. “This shows the regulations are no longer serving the purpose of boosting the sales of small stores and traditional markets, as customers’ demand for convenient shopping now favors online shopping and midsize supermarkets,” said Cho Choon-han, a professor at Gyeonggi College of Science and Technology.
In another survey by the KCCI on 400 retailers, 43 percent of respondents said the biggest threat to their business is e-commerce, while only 17.5 percent picked large discount chains.
“Large stores are not the only threat to traditional markets, and the government should consider changing its policy to help each retail sector to improve competitiveness,” the KCCI said.
A banner at a Lotte Mart store in Seoul Station shows that it closes on the second and fourth Sunday of every month in this file photo. Calls are growing that regulations on large discount stores should be lifted as the restrictions no longer serve their purpose of protecting traditional markets.