Sangui "Distribution Industry Faces Q4 Business Slump Due to COVID-19... Fees and Regulations Need Improvement"

[Asia Economy Reporter Ki-min Lee] It is forecasted that the retail distribution industry will find it difficult to recover in the fourth quarter of this year due to the impact of the novel coronavirus infection (COVID-19).

The Korea Chamber of Commerce and Industry conducted a survey of 1,000 retail distribution companies and found that the Retail Business Survey Index (RBSI) for the fourth quarter of this year was 85, up 3 points from the third quarter. An RBSI below 100 indicates that more companies expect the business climate to worsen compared to the previous quarter.

By business type, only the online and home shopping sectors (108) exceeded 100, buoyed by the strength of non-face-to-face shopping and expectations for year-end demand such as Christmas. Department stores (96) also approached 100, supported by expectations for year-end demand and plans for the second half of the Korea Sale Festa, a national promotional event.

Convenience stores (78) saw an increase in the outlook last quarter due to the summer peak season and new revenue sources from the allowance of alcoholic beverage (wine) sales, but the fourth quarter marks the start of the off-season for convenience stores, so sales growth is expected to slow down.

Large discount stores (54) and supermarkets (61) are expected to struggle to boost sales due to competition with e-commerce companies, convenience stores, and delivery service providers amid the spread of COVID-19. In particular, the Korea Chamber of Commerce and Industry noted that large discount stores will face additional challenges as the extension of business operation regulations under the Distribution Industry Development Act last month will negatively impact management activities.

To cope with the prolonged COVID-19 situation, 56.7% of distribution companies said they would 'reduce costs,' while 22.5% responded that they have no countermeasures. Smaller business types showed higher response rates to this, indicating greater difficulty in preparing countermeasures. In contrast, responses related to efforts to secure competitiveness such as 'changing business type or products (7.6%)', 'securing liquidity (5.0%)', and 'expanding online sales (2.0%)' were low.

The distribution industry identified 'tax reductions' (34.1%) as the most necessary government support measure. This was followed by 'support for the second disaster relief fund' (30.5%), 'regulatory relaxation' (25.9%), 'support for business stabilization funds' (21.3%), and 'support for employment stabilization funds' (20.2%). The second disaster relief fund ranked second in responses, reflecting high expectations as the first disaster relief fund had been a significant support for the distribution industry.

Kang Seok-gu, head of the Industrial Policy Team at the Korea Chamber of Commerce and Industry, stated, “Consumption acts as a barometer of the economy, and the sluggish retail business indicates that consumer sentiment remains frozen.” He added, “Since early recovery of consumer sentiment is not easy, it is necessary to first improve various burdens and regulations that are not suitable for the current reality so that companies can endure the crisis and seek new opportunities.”

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