Retail Industry's Desperate Plea on the Edge: "Please Change to Weekday Closures"

Change Large Mart Closures to Weekdays

Grant Tax Relief to Duty-Free Shops

Large Marts Have Experienced Growth Slowdown for Years

Duty-Free Shops’ Sales Halved Compared to Last Year

[Asia Economy Reporter Lim Hye-seon] The retail industry, struggling due to the spread of the novel coronavirus infection (Wuhan Pneumonia), has raised a unified voice asking for "regulatory flexibility." With growth having slowed for years, the outbreak of the novel coronavirus has caused retail companies' sales to plummet compared to the previous year. The industry expects that if the novel coronavirus situation prolongs, the number of stores closing due to repeated temporary shutdowns and sales declines will increase.

According to the retail industry on the 12th, large marts have recently appealed to local governments to temporarily change their mandatory closure days from weekends to weekdays. Under the Distribution Industry Development Act strengthened in 2012, large marts with an area of 3,000㎡ or more are subject to regulations such as restricted operating hours (midnight to 10 a.m.) and mandatory closure days (twice a month on public holidays). Among these, the designation of mandatory closure days has been the starting point of profitability decline for marts. Although regular closure dates can be adjusted through consultation with local governments, few adjustment proposals have been approved. In fact, since the law was amended, only about 10-20% of large marts have changed their mandatory closure days to weekdays over the past eight years. The bigger problem is this year. Retail stores suspended operations for 3 to 5 days simply because one confirmed case of the novel coronavirus visited. Additionally, due to the public’s reluctance to use multi-use facilities, even stores that remained open saw customer numbers drop sharply.

Kim Ik-seong, president of the Korea Distribution Science Association, said, "Since the novel coronavirus outbreak, retail companies have been losing tens of billions of won daily," and added, "There is a need to exercise regulatory flexibility by maintaining mandatory closure days twice a month temporarily but allowing companies to autonomously decide the days."

He also expressed the view that the pace of minimum wage increases needs to be adjusted. Kim said, "Offline markets cannot win the cost-effectiveness competition against online markets," and "To provide differentiated services, many employees need to be hired, but the minimum wage increase could be an obstacle." He further stated, "Large retail companies should also postpone the timing of minimum wage increases."

The sector hit hardest by the novel coronavirus outbreak is the duty-free shops. Since the beginning of this month, duty-free shop sales have plunged by 50% compared to the previous year. Industry leaders Lotte Duty Free and Shilla Duty Free temporarily closed their main and Jeju branches, respectively. As Chinese authorities advised against overseas travel for Chinese citizens, the number of Chinese tourists in Korea sharply declined. In response, Lee Il-jae, director of the Korea Duty Free Association, attended a business meeting hosted by Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki at the Seoul Chamber of Commerce on the 7th, requesting, "Please help duty-free shops operate their businesses stably." He also proposed tax relief such as reductions in license fees.

Kim said, "Unlike manufacturers, government support for retail companies is almost nonexistent," and suggested, "Expanding investment tax credits for companies and strengthening financial support for logistics systems are ways to help businesses." Regarding this, the Ministry of Trade, Industry and Energy stated, "We are listening to various opinions, but no support measures have been decided yet."

There are also rumors that the government is considering the option of reducing individual consumption tax, as it did during the 2015 Middle East Respiratory Syndrome (MERS) outbreak. At that time, the government announced measures to stimulate consumption. The retail-related measures included reducing individual consumption tax, adjusting taxable price standards, and promoting joint advertising by large retail companies. From August 2015, the government cut the individual consumption tax by 30% for four months. Although there was a temporary effect, it is evaluated that it did not have a significant long-term impact. A retail industry official explained, "The individual consumption tax reduction policy did help boost domestic demand, but retail companies were not the direct beneficiaries," and added, "Fundamental measures are needed."

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