GS25 "Reporting the Defense of Convenience Store No.1"

Maintaining No.1 Store Count by Securing Navy PX Operation Rights
Criticism of Hollow Glory Due to High Discount Rates

[Asia Economy Reporter Seungjin Lee] GS25 has maintained its position as the number one convenience store chain by retaining the operation rights of the Navy base stores (PX). However, there is also analysis suggesting that the high sales discount may cause more harm than good.

According to the industry on the 20th, GS25 won the bid for the '2020 Navy Mart consignment operation private business operator selection' by the Military Welfare Agency, securing the operation rights for 227 Navy PX stores. GS25 will operate the Navy PX stores for the next five years until June 30, 2025. GS25 has been operating the Navy PX for the past 10 years, having first won the bid in 2010 and successfully renewed it in 2015.

This bid was particularly notable as it is a large-scale bidding event held every five years, with the potential to change the rankings of the top one and two convenience store chains. In November last year, GS25 surpassed CU, which had held the number one spot in store count for 17 years since 2002, to become number one. At that time, GS25 had 13,899 stores, while CU had 13,820, a difference of only 79 stores. However, GS25 succeeded in maintaining its number one position by retaining the Navy PX.

The bid results were determined by which company offered a higher discount rate than the minimum 35% sales discount rate set by the Military Welfare Agency. The two top convenience store chains, GS25 and CU, participated in the bidding, and GS25 is reported to have offered a higher discount rate. The minimum sales discount rate set by the Military Welfare Agency has steadily increased from 20% in 2010 to 30% in 2015, and 35% this year.

Therefore, some point out that this is a hollow victory. According to the industry, the typical profit margin for convenience stores is around 30-40%, and GS25 has set the sales discount rate close to its margin. In addition, GS25 must pay an annual fee of 1 billion KRW and 2.5% of monthly sales revenue to the Military Welfare Agency.

If monthly sales exceed 4 million KRW, investment in facility improvements is also required. Although discounts are reflected in the sales price, if discount events are held at regular convenience stores, the same must be applied to PX stores, among other various regulations, resulting in extremely low profitability.

A GS25 representative stated, "The reason we have continued the PX business for over 10 years is due to national public interest and social contribution," adding, "Rather than being obsessed with maintaining the number one store count in the future, we plan to participate cautiously with a long-term perspective based on sound management judgment."

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