TV Home Shopping Has the Highest Sales Commission Rate at 28.9%... Fair Trade Commission to "Create Standard Contracts"

Results of Major Brand Survey by Large Retailers

Despite Overall Decline in Commission Rates in the Distribution Sector, Burden on Non-Face-to-Face Suppliers Remains High
Online Shopping Mall Commission Rates↑…Coupang at 31.2%

Trend of changes in sales commission rates.

[Sejong=Asia Economy Reporter Joo Sang-don] Although the sales commission rate for TV home shopping slightly decreased compared to the previous year, it still remains high at 28.7%. Meanwhile, online shopping malls, which have rapidly grown due to COVID-19, saw an increase in commission rates. In response, the Fair Trade Commission plans to revise the standard transaction contracts for online shopping malls and TV home shopping next year to reduce the burden on suppliers.

On the 9th, the Fair Trade Commission announced the results of a survey on sales commission rates and other factors for 34 major brands across six major distribution types: TV home shopping, large supermarkets, online shopping malls, outlets/complex shopping malls, and convenience stores.

The results showed that commission rates in the distribution sector generally declined across most types, easing the burden on suppliers and tenants, but increased in online shopping malls. The commission rate is calculated by dividing the total commissions and additional costs (such as sales promotion expenses) received by large-scale retailers from suppliers and tenants over one year by the total sales amount of products.

The commission rates ranked as follows: TV home shopping (28.7%), department stores (19.7%), large supermarkets (18.8%), outlets/complex shopping malls (13.9%), and online shopping malls (10.7%). The brands with the highest commission rates within each category were NS Home Shopping (35.5%), Lotte Department Store (20.0%), Homeplus (19.3%), NewCore Outlet (18.7%), and Coupang (31.2%).

The commission rates applied by distribution companies to small and medium-sized suppliers and tenants were still higher than those applied to large suppliers and tenants. The largest difference in commission rates between these two groups was in TV home shopping at 9.1 percentage points, while online shopping malls had the smallest difference at 0.4 percentage points. Compared to the previous year, this gap increased in large supermarkets (2.4 percentage points) and outlets/complex malls (0.4 percentage points), but decreased in TV home shopping (-3.1 percentage points), online shopping malls (-1.4 percentage points), and department stores (-1.0 percentage points).

A Fair Trade Commission official stated, "Although commission rates for TV home shopping are on a downward trend, they remain high, and online shopping malls have seen increases in commission rates and additional cost burdens. This indicates that suppliers face high burdens in the rapidly growing non-face-to-face distribution sector due to COVID-19. Considering these market conditions, we plan to revise the standard transaction contracts for online shopping malls and TV home shopping next year to clarify the standards for sharing sales promotion costs and reduce the burden on suppliers."

Regarding transaction methods, direct purchase transactions accounted for high proportions in convenience stores (98.7%), large supermarkets (83.7%), and online shopping malls (71.6%). Consignment transactions were dominant in TV home shopping (78.1%), special purchase contracts in department stores (65.6%), and lease transactions in outlets/complex shopping malls (85.4%). Lease transactions involve large-scale retailers collecting rent linked to product sales revenue from tenant stores that lease the space.

The ratio of sales incentives borne by suppliers relative to direct purchase transaction amounts was highest in convenience stores (1.7%), followed by online malls (1.6%), large supermarkets (1.2%), and outlets/complex malls (0.3%). Compared to the previous year, the sales incentive burden increased in online malls (0.5 percentage points) and large supermarkets (0.1 percentage points), but decreased in outlets/complex shopping malls (-0.2 percentage points).

The proportion of suppliers who experienced returns in direct purchase transactions was highest in convenience stores (25.4%), followed by large supermarkets (15.9%), outlets/complex shopping malls (12.7%), online malls (9.9%), department stores (6.7%), and TV home shopping (4.2%).

The ratio of additional costs borne by suppliers and tenants?such as sales promotion costs, logistics and delivery fees, server usage fees, and other expenses?relative to transaction amounts was highest in convenience stores (7.2%), followed by online malls (4.9%), large supermarkets (3.8%), TV home shopping (0.6%), department stores (0.2%), and outlets/complex malls (0.1%). Compared to the previous year, these additional costs slightly increased in online malls (1.4 percentage points), large supermarkets (0.7 percentage points), convenience stores (0.3 percentage points), and outlets/complex malls (0.1 percentage points).

A Fair Trade Commission official said, "While commission rates have decreased in offline distribution sectors, reducing the overall burden on suppliers and tenants, some items such as sales promotion costs have increased. We will continue to monitor transaction practices related to these items. The Fair Trade Commission will also continue to disclose information on sales commissions and additional costs to help suppliers and tenants use this data during negotiation processes."

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