Despite Lower Effective Commission Rates for Large Retailers... Small and Medium Enterprises Still Bear Greater Burden Than Large Corporations

Fair Trade Commission, Results of the '2020 Large Retailers Distribution Transaction Survey'

Effective Commission Rate Decreases by 0.2~1.8%P
Small and Medium Enterprises Have Commission Rates Up to 12.2%P Higher Than Large Corporations' Suppliers and Tenants

[Sejong=Asia Economy Reporter Joo Sang-don] It has been revealed that the effective sales commission rate actually borne by suppliers and tenants in distribution transactions has been gradually decreasing recently. However, the commission rates for small and medium enterprises (SMEs) remain higher compared to large corporations.

On the 8th, the Fair Trade Commission announced the results of a written survey on 34 major brands across six major distribution sectors: department stores, TV home shopping, large discount stores, online shopping malls, outlets/complex shopping malls, and convenience stores.

Sales commissions are divided into nominal commission rates stated in contracts and the effective commission rates actually applied. The nominal commission rate is the arithmetic average of the sales commission specified in the transaction contract, while the effective commission rate is calculated by dividing the actual amount received, including commissions, by the product sales amount.

The effective commission rates were highest in the following order: TV home shopping (29.1%), department stores (21.1%), large discount stores (19.4%), outlets/complex shopping malls (14.4%), and online shopping malls (9.0%). The brands with the highest effective commission rates were NS Home Shopping (36.2%), Lotte Department Store (22.2%), Lotte Mart (19.8%), NewCore Outlet (18.3%), and Coupang (18.3%).

The effective commission rates decreased compared to the previous year across all sectors. Large discount stores dropped from 19.6% to 19.4% (0.2 percentage points), and online malls decreased from 10.8% to 9.0%. However, Coupang (up 10.1 percentage points), Hanaro Mart (up 2.1 percentage points), and Lotte Mart (up 1.1 percentage points) saw increases. The Fair Trade Commission attributed the decrease in effective commission rates mainly to the shift of distribution channels to online platforms, reductions in nominal commission rates in traditional offline sectors such as department stores, outlets, and large discount stores, and intensified promotional activities due to fierce competition between online and offline sectors.

The effective commission rates for small and medium suppliers and tenants decreased last year in all sectors, including online (-2.3 percentage points) and home shopping (-0.8 percentage points). Additionally, the gap in commission rates between large corporations and SMEs narrowed in most sectors.

However, when suppliers and tenants are SMEs, the effective commission rates remain higher than those for large corporations. The largest gap was in TV home shopping at 12.2 percentage points, followed by outlets/complex shopping malls (4.7 percentage points), large discount stores (2.3 percentage points), department stores (2.2 percentage points), and online malls (1.8 percentage points). The nominal commission rates, which are fixed-rate commissions, were also higher for SMEs.

The sectors where suppliers and tenants bear higher additional costs beyond sales commissions?such as promotional expenses, logistics and delivery fees, and server usage fees?are convenience stores (6.9%), online shopping malls (3.5%), and large discount stores (3.1%). Regarding server usage fees, online shopping malls had the highest proportion of costs borne by suppliers (31.3%) and the highest proportion of the amount borne (0.2%).

A Fair Trade Commission official stated, "As online shopping malls emerge as important distribution channels and impose various forms of economic burdens, including promotional expenses, on suppliers, it is necessary to establish clear legal enforcement standards to prevent unfair cost shifting." The official added, "Accordingly, the Fair Trade Commission plans to enact and announce the 'Guidelines for Reviewing Unfair Trade Practices by Online Shopping Mall Operators.'"

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