At the Headquarters Direct Mall... Convenience Stores Lose Sales of Lunchboxes and Gimbap

GS Retail Launches Supermarket-Based Direct Mall 'GS Fresh Mall'
Sells Convenience Store PB Products Like Lunchboxes and Kimbap
10-20% Discounts... Dedicated Online-Only Delivery Center
Competes with Franchise-Based GS25 Stores

GS Retail's PB product "Gisanimdo Banhang Dosirak"

[Asia Economy Reporter Cha Min-young] As the trend of preferring online over offline and non-face-to-face over face-to-face continues, convenience stores and beauty shops that operate mainly through franchises are caught in an 'online transition dilemma.' This is because the headquarters is strengthening online channels by offering exclusive products and discounts, which is causing growing dissatisfaction among franchise owners who focus on offline sales. There are even concerns about self-cannibalization, as this could potentially shake the very foundation of the franchise business model.

According to the distribution industry on the 22nd, GS Retail’s directly operated online mall GS Fresh is selling private brand (PB) products such as lunch boxes and kimbap, which are the same types sold at the convenience store GS25, at discounts of about 10-20%. The 'Mom’s Cheese Pork Cutlet Lunch Box,' normally priced at 4,500 won, is being sold at a 20% discount for 3,600 won. The 'Tuna Mayo Kimbap 2 Rolls,' sold at 4,000 won in convenience stores, is offered at a 10% discount for 3,600 won. Other popular convenience store products like 'Lunch Box Loved by Delivery Drivers' and 'Eonyang-style Bulgogi Kimbap' are mostly sold under the same names but at reduced prices.

These ready-to-eat products are delivered from GS Fresh’s online-exclusive stores to customers’ delivery addresses. A GS25 franchise owner in Jung-gu, Seoul, said, "If products sold at regular prices in convenience stores are sold cheaper online, it inevitably causes problems with sales," adding, "The basic principle of a franchise is to avoid creating a competitive structure between the headquarters and franchisees. While I understand the need to strengthen online business, it is problematic for the headquarters to sell products at discounted prices."

GS Retail operates the convenience store GS25 and the corporate supermarket (SSM) GS The Fresh. GS25 is based on a franchise business model focused on franchise stores, while GS The Fresh has some franchise stores but a high proportion of directly operated stores. GS Retail is actively fostering its online mall. It is listed on its own online mall, the affiliated home shopping company GS Shop (GS Home Shopping) online mall, and also operates a specialty shop on the online marketplace Gmarket. This has led to issues as GS The Fresh strengthens its online business.

The GS Retail headquarters explained that the directly operated mall mainly handles increased online orders and supports GS The Fresh’s offline stores as a backend function. A GS Retail official said, "Operating a direct mall online-exclusive center is a measure to cover areas without nearby supermarket franchise stores," adding, "Just because products are sold through the direct mall does not mean the headquarters gains all the profits."

Private brand products at convenience stores are one of the important factors considered when starting a business and a key criterion for customers choosing a store. Therefore, the headquarters directly discounting and selling not only general manufacturer products but also PB products, creating a competitive structure, is criticized for undermining the competitiveness of convenience store franchisees. Franchise owners are particularly concerned because e-commerce and online malls are free from restrictions on store opening distances, which could have a greater ripple effect.

A representative from the National Convenience Store Franchise Owners Association said, "Unlike offline, online has no restrictions on store openings and has a large influence, so it is unreasonable for the headquarters to directly operate an online mall," adding, "Competition is already difficult with online-based delivery and shipping services, and it is hard for us to respond when the headquarters also infringes on local commercial districts."

The cosmetics industry has already experienced conflicts with franchise owners over the headquarters’ efforts to strengthen online malls since last year. A representative case is the conflict involving domestic cosmetics company Amorepacific selling the same products online as those sold by franchise owners of affiliated brands such as 'Aritaum,' 'Innisfree,' and 'Etude House.' Innisfree introduced the 'My Shop' system, which shares online sales with offline franchise owners, as a compromise.

LG Household & Health Care closed its online mall after conflicts with franchise owners related to the 'The Face Shop' brand but reopened it last July after about a year with improvements. Sales and profits generated from the online mall are attributed to the franchise 'My Store.' Able C&C also recently announced the operation of 'MyNung.com,' a comprehensive cosmetics online mall integrating BeautyNet, Missha, and A’PIEU online malls, which has caused dissatisfaction among existing franchise owners.

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