‘Re­move re­stric­tions on dis­count stores’

The Korea Times - - BUSINESS - By Nam Hyun-woo [email protected]­re­atimes.co.kr

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.

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