[Asia Exclusive] Vice Chairman Yeom Gyuseok: "In Disaster Crises, Convenience Store Logistics Are Lifelines... It's Time to Enhance Their 'Public Function'"

Jeju Island Heavy Snowfall and Yeonpyeongdo Artillery Incident

Utilizing Distribution Network and Accessibility to Supply Goods

Called 'Lifeline' During Japan's Great Earthquake

Yeom Gyu-seok, Executive Vice President of the Korea Convenience Store Industry Association. / Photo by Hyunmin Kim kimhyun81@

[Dialogue = Myung Jin-gyu, Head of Consumer Economy Department; Summary = Reporter Lim Hye-sun] The convenience store market has grown rapidly over the past decade in the distribution industry. Convenience stores, once places to buy just cigarettes, triangular kimbap, and cup noodles, have continued to grow by absorbing various lifestyle convenience services. Last year, the convenience store market size exceeded 25 trillion won in sales. This is more than double the size since surpassing 10 trillion won in 2011, within eight years. The number of convenience stores nationwide surged from about 21,000 to approximately 44,000. The background for the rapid growth of convenience stores lies in demographic changes. As the proportion of single-person households increased, consumption patterns shifted toward nearby shopping, small quantities, and small packaging, leading to more people using convenience stores. Starting as a small hole-in-the-wall store in 1989, convenience stores have transformed into a solid lifestyle platform by offering various services. However, even the annually growing convenience store market faces challenges this year. The global spread of the novel coronavirus infection (COVID-19) has also impacted convenience stores.

On the 20th, at the Korea Convenience Store Industry Association in Songpa-gu, Seoul, Vice Chairman Yeom Kyu-seok said, "In February, the COVID-19 situation did not affect convenience stores much, but from March, we have been facing difficulties due to a significant drop in sales," emphasizing, "Legal and policy support is necessary." Vice Chairman Yeom explained that the association's key tasks this year are 'regulatory improvement' and 'public function.' He said, "We are researching from various angles to improve unreasonable regulations that hinder growth," and added, "The association will faithfully play the role of a facilitator so that the convenience store industry can have a broad infrastructure and perform public functions." Below is a Q&A with Vice Chairman Yeom.

Doubling Growth in 8 Years Due to Increase in Single-Person Households

Large-Scale Distribution Act's 'Sales Criteria' Applied to Crack Down on Unfair Practices in Department Stores and Large Marts

- What impact will prolonged COVID-19 have on the convenience store industry?

▲ The convenience store industry is also struggling due to decreased sales caused by COVID-19. However, compared to other offline distribution channels, the sales decline is somewhat less. But if this situation continues for a considerable period, convenience stores will inevitably be affected. Some stores visited by confirmed patients have suffered significant losses due to quarantine measures and business suspensions. If telecommuting spreads and the number of self-quarantined individuals increases, anxiety will intensify, economic activities will be restricted, and consumer sentiment will inevitably shrink.

- The association emphasizes the public role of convenience stores, such as selling public masks. Could you elaborate?

▲ During the 2011 Great East Japan Earthquake, convenience stores in Japan were called the 'lifeline.' When all logistics in Japan were disrupted, only convenience store logistics remained operational. Convenience stores supplied goods to affected areas based on their nationwide distribution network and high accessibility. In Korea, convenience stores also responded during the Jeju Island heavy snowfall and the Yeonpyeongdo incident. Convenience stores must perform essential public functions for the people.

- The convenience store market has grown rapidly due to the increase in single-person households.

▲ From a demographic perspective, the steady increase in single-person households is the biggest factor. The rise in single-person households has changed shopping trends and patterns, such as neighborhood consumption, small quantity purchases, and shortened purchase cycles. These changes have led to purchasing behavior favoring convenience stores with easy accessibility, and the strengthening of brand selection factors through differentiated products and services unique to each brand has been effective. Additionally, franchise headquarters have introduced mobile applications and delivery services to enhance convenience and encourage participation through 'customer relationship management,' minimizing customer churn and increasing loyalty through a 'lock-in effect.'

- What are the competitive advantages of convenience stores compared to large distribution channels?

▲ The biggest competitive advantage of convenience stores is 24/7 operation, 365 days a year. Operating 24 hours a day and year-round is not just a characteristic that distinguishes convenience stores from other offline distribution channels. If limited business hours are seller-centered, 24-hour operation is consumer-centered. Convenience stores focus on 'the time consumers want,' not 'the time sellers set.' This is meaningful in providing consumers with shopping without time constraints.

Differentiated products and various lifestyle convenience services are also unique competitive advantages of convenience stores. There was a time when convenience stores were regarded as 'stylish hole-in-the-wall stores,' but by providing various lifestyle convenience services such as ATMs, parcel delivery, car insurance payment agency services, and in-store pickup for online purchases, consumers' perception of convenience stores has changed from mere retail shops to convenient lifestyle consumption hubs. Another advantage is excellent accessibility. Convenience stores are distributed in various commercial areas such as apartments, offices, and university districts, and have the location characteristic of being on the first floor.

Therefore, they are easily accessible to residents, workers, and floating populations. Especially, they serve as neighborhood shopping places that are safe and convenient for so-called 'shopping vulnerable' groups such as the disabled and elderly, who find it difficult even to purchase daily necessities.

The Future is Not Unmanned but Service Enhancement

Aiming to be an Indispensable Lifestyle Platform

- What are the obstacles to the growth of the convenience store industry?

▲ The convenience store industry is regulated by two laws: the Franchise Business Act and the Large-Scale Distribution Act. The Franchise Business Act, enacted in November 2002, has been amended over 20 times as social issues such as economic democratization and power imbalance have emerged, strengthening regulations. The Large-Scale Distribution Act was enacted to regulate unfair trade practices between suppliers and distributors in department stores and large marts. However, franchise headquarters of convenience stores with sales exceeding 100 billion won are also considered large-scale distributors and are subject to overlapping regulations. While some supplementation is needed following the law's enforcement, strengthening regulations beyond the law's original purpose and intent could hinder the development of the convenience store industry and put it at risk.

- Please introduce the current status of future-type stores such as unmanned stores.

▲ First, I want to clarify that Korea's future-type convenience stores do not aim for unmanned operation. Some tend to equate future-type stores with unmanned stores, but unmanned operation is only a part of future-type stores.

The goal of future-type convenience stores can be described as 'enhancing customer service.' Systems using artificial intelligence (AI) technology provide product payment and information, allowing staff to focus more on product and store management and customer service. Our association members are actively investing in developing optimized future-type convenience stores considering the characteristics of the business type and store size, not just unmanned operation. Currently, some convenience stores are piloting future-type stores using AI robots, biometric authentication, and mobile technology. If technological advancement accelerates, 'beyond imagination' future-type convenience stores may appear within a few years.

- What is the future of convenience stores?

▲ I believe the future of convenience stores is as a 'lifestyle platform.' Even now, convenience stores provide more diverse lifestyle convenience services than any other distribution channel, and over time, their role in daily life will increase. Beyond satisfying needs, they will provide products and services that accommodate and satisfy various individual consumer demands, expand public functions and roles, and aim to be a social infrastructure and an indispensable 'lifestyle platform' in daily life. While premature predictions are difficult, I expect convenience stores to evolve not just into a distribution channel that is 'inconvenient without' but to a level where 'life is impossible without' them. In that sense, consumer benefits are the ultimate destination of convenience store transformation.

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