"10 Years of Distribution Regulation: No Effect, Only Market Disorder"

Source: Korea Chamber of Commerce and Industry

[Asia Economy Reporter Changhwan Lee] Criticism has emerged that government distribution regulations, such as restrictions on large mart operating hours, have had no real effect and only disrupted market order.

The Korea Chamber of Commerce and Industry (KCCI) announced on the 24th that it held a 'Distribution Law and System Innovation Forum.' During the forum's discussion session, the effectiveness of distribution regulations was reviewed. The discussants unanimously agreed that the regulations were ineffective and did not fit the newly changed realities of the distribution industry.

Analyzing changes in retail sales by business type between 2012, when the large mart operating day regulation was implemented, and 2019, eight years after the regulation, KCCI found that total sales increased by 43.3%. In particular, despite the regulation being introduced to protect traditional markets, sales at 'specialty retail stores including traditional markets' increased by only 28.0%, which was lower than the overall sales growth rate, and 'large marts' recorded a -14.0% decline, the only retail type to show negative growth.

Professor Seungho Ahn of Soongsil University emphasized, “The current distribution regulations were introduced without quantitative and specific policy goals, and their effects have never been empirically verified. Amid the COVID-19 pandemic crisis, the online sales restrictions on large marts must be lifted at least so that residents of small local cities can safely receive local food deliveries through nearby large marts.”

Professor Youngkyun Lim of Kwangwoon University said, “Distribution policies should be designed centered on consumer welfare, but the intention to protect small business owners and traditional markets led to the unfortunate use of large distribution regulations. The extension of the sunset clause for distribution regulations should be based on a post-evaluation of their effectiveness, and the extension period should be minimized. It is disconcerting that legislation is being pushed for a five-year extension without even minimal evaluation.”

Professor Byungtae Lee of KAIST criticized, “The background of distribution industry regulations stems from the political ideology of economic democratization. Regulating large marts in the rapidly changing distribution environment has led to the emergence of another predator called ‘food material marts,’ which only disrupts market competition order and simultaneously causes further hardship for traditional market merchants and small business owners in local shopping districts.”

Hwabong Noh, head of policy research at the Small Enterprise and Market Service, said, “Although the distribution operating day regulation has lasted for eight years, the competitiveness of small business owners and traditional markets remains minimal, so related regulations need to continue. The target of regulation should shift to large online distribution companies that are rapidly encroaching on the market in response to changes in distribution order.”

Meanwhile, opinions were also presented to enhance the competitiveness of small business owners and traditional markets through practical alternatives. The biggest difficulties for small business owners are increased burdens from rent, labor costs, and commissions, as well as displacement within commercial districts (gentrification). As solutions, proposals included ‘expanding tax credits for shopping district development’ and strengthening ‘customized lease protection laws’ for small merchants.

Additionally, for traditional markets, ideas were proposed to benchmark and expand nationwide the successful ‘win-win stores’ introduced in Dangjin Fish Market and Gyeongdong Market.

Taehui Woo, executive vice president of KCCI, stated, “As the COVID-19 crisis is dismantling existing orders, swift responses are more necessary than ever for the distribution industry to regain vitality. It is essential to innovate distribution regulations, which are legacies of past distribution orders, and to pursue realistic and rational policy shifts in preparation for the post-COVID era.”

Meanwhile, at this forum, Taeho Shim, CEO of LPK Robotics, analyzed changes in consumer behavior due to COVID-19 and forecasted the future of the distribution industry in a presentation titled ‘Consumer Trends and Distribution Industry in the Post-COVID Era.’ Shim is an expert in distribution who formerly served as CEO of AT Kearney Korea, a corporate consulting firm.

He said, “Due to the COVID-19 situation, non-face-to-face consumption culture such as home economy, where people consume without leaving their homes, is rapidly spreading, while consumption paradigms are simultaneously shifting toward safety. Utilizing Fourth Industrial Revolution technologies such as big data and artificial intelligence, the era of untact retail will arrive, featuring live commerce selling products through virtual reality and real-time video, kiosks, and drive-thru services.”

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