From AI Future Stores to PB Competition... Convenience Stores Struggle to Survive

GS25·Emart24 Integrate AI Technology
Labor Cost Reduction Through Automation
Expansion of Convenience and Parcel Services
Focusing on Profitability Instead of Quantitative Growth

[Asia Economy Reporter Cha Min-young] The domestic convenience store industry, facing a growth cliff, is opening new avenues through future-oriented stores integrated with IT technology, differentiated services, and product launches. As the phrase "one out of five convenience stores is operating at a loss" becomes an open secret due to the increasing number of low-profit stores, the pace of such moves in the convenience store industry is expected to accelerate.

◆ Emergence of AI Future-Oriented Stores = According to the industry on the 16th, GS25 recently partnered with BC Card and Smartro to open the future-oriented convenience store "GS25 Eulji Smart Branch" at the BC Card Eulji Twin Tower headquarters. Utilizing artificial intelligence (AI) technology-based payment systems and QR code-based personal identification systems, they established a "checkout-free" convenience store. This is a step forward from the industry's first "unmanned convenience store" introduced in September 2018 in the Magok district of Gangseo-gu. A total of 34 smart cameras follow customers around, analyzing their movement paths and product purchasing behavior. Facial recognition technology is used to build the payment system, and about 300 weight sensors are installed in refrigerators and product displays to monitor inventory.

Emart24 also introduced the future-oriented convenience store "Emart24 Gimpo DC Branch" last year in collaboration with Shinsegae I&C, a subsidiary of the Shinsegae Group, applying the "Just Walk Out" technology. Customers can use the SSG Pay app to issue a QR code for store entry and then use it. Payment is completed simply by picking up items without a separate checkout process.

Future-oriented stores are cost-effective outlets that align with the convenience store industry's digital transformation strategy. Unmanned technology can reduce labor costs associated with 24-hour operations for convenience store owners. However, since data accumulation requires time, the future-oriented stores introduced by GS25 and Emart24 are closer to pilot stores. There is also a limitation in scalability because they must be linked with specific card companies.

◆ Focus on Customer Satisfaction through PB, Delivery, and Consignment = Developing private brand (PB) products and expanding various lifestyle convenience services are also new trends in the convenience store industry. CU offers easy-to-cook foods such as "Majangmyeon" and "Meat Pie," developed in collaboration with the TV entertainment program Convenience Store Restaurant, as well as popular CU lunch boxes. Recently, desserts and bakery items, including the chewy macarons made in partnership with small and medium-sized enterprises, have gained popularity. Ministop has also attracted customers with foods like chicken and hot bars that can be eaten inside the store. Seven Eleven is expanding its private brand Seven Select products beyond simple food and beverages to household goods and processed products.

Convenience store parcel services and product delivery are also expanding. The number of users of GS25's convenience store parcel service increased by 26.6% in 2018 compared to 18.4% in 2017. Seven Eleven and CU also saw increases in parcel service users by 23.1% and 13%, respectively, surpassing 16.2% and 8% in 2017. CU's delivery stores, created in connection with delivery-specialized apps, numbered 3,000 as of January and are expected to increase to 5,000 in the first quarter of this year. Some stores, mainly in the Gangnam area of Seoul, are preparing for 24-hour operations.

◆ Survival Strategies in a Red Ocean Market = As of the end of November last year, GS25 had 13,899 stores. Following are CU (13,820 stores), Seven Eleven (10,005 stores), Emart24 (4,438 stores), and Ministop (2,582 stores), totaling about 44,700 convenience stores among the four companies. Including small and medium-sized convenience stores, the number easily exceeds 50,000. However, profitability continues to decline. Woo Won-sik, a member of the Democratic Party, pointed out during last year's national audit that among 33,068 major convenience store outlets, 6,647 (20.9%) were operating at a loss.

A convenience store industry official said, "There used to be stores, including subway locations, aimed at increasing brand awareness," adding, "But now, concerns about profitability have grown, so instead of indiscriminate quantitative growth, there is a heightened sense of crisis that we must compete with unique stores." He added, "The battle to enhance competitiveness through unmanned convenience stores, PB products, and lifestyle-oriented services has begun."

This content was produced with the assistance of AI translation services.