Tears of Large Mart and SSM... Will Regulatory Easing Provide Relief?

Decline in Store Numbers and Sales... Loss of Competitiveness Due to Continued Regulations
Presidential Office Holds Public Vote on Mandatory Holiday Abolition Proposal
Rapid Progress in Deregulation Talks... Retail Industry's 'Optimism'
Opposition from Self-Employed and Small Business Owners Remains an Obstacle

[Asia Economy Reporter Lim Chun-han] Although the offline distribution industry is regaining momentum due to the easing of social distancing measures, the number of stores and sales of large discount stores and Super Supermarkets (SSM) are actually decreasing. Distribution regulations such as restrictions on store openings and operating hours, and mandatory holidays, introduced to protect traditional markets, are continuing, causing these sectors to gradually lose competitiveness.

According to the Ministry of Trade, Industry and Energy on the 29th, the number of large discount stores and SSM stores has been declining every year. The number of large discount stores decreased from 410 in June 2018 to 381 in June this year, and during the same period, SSMs decreased from 1,225 to 1,095. Sales of large discount stores and SSMs are also on a downward trend. In the first half of this year, sales of major distribution companies increased by 9.3% compared to last year. Offline distribution companies’ sales rose by 8.4%, and online distribution companies’ sales increased by 10.3%. While department stores and convenience stores saw sales increase by 18.4% and 10.1% respectively, large discount stores and SSMs saw sales decrease by 1.5% and 1.9% respectively. For large discount stores, sales in other sectors such as cafes and food courts increased by 3.7%, but sales in home and living (-3.7%) and electronics and culture (-3.6%) sectors declined. For SSMs, sales decreased in both non-food categories such as daily necessities and household goods (-3.3%) and food categories (-1.7%).

Currently, discussions on easing operating regulations for large discount stores and SSMs are gaining momentum. The Fair Trade Commission is promoting a plan to exclude online delivery from the scope of operating hour restrictions and mandatory holidays, while the Presidential Office has put the abolition of mandatory holidays for large discount stores to an online public vote. In fact, in the ongoing online public vote conducted by the Presidential Office, ‘abolition of mandatory holidays for large discount stores’ is receiving the most votes. As of 8 a.m. on the day, according to the Presidential Office’s public proposals, the ‘abolition of mandatory holidays for large discount stores’ has received 576,388 ‘likes’ among the ‘Top 10 Public Proposals.’ The Presidential Office plans to select 10 proposals out of about 12,000 complaints, suggestions, and petitions received that are deemed feasible for policy, and conduct a 10-day online public vote until the 31st, reflecting the top three in national policy.

The distribution industry’s expectations for regulatory easing are high. A representative from a large discount store said, “Currently, large discount stores and SSMs face reverse discrimination due to distribution regulations and cannot compete fairly with e-commerce and food material marts,” adding, “The industry situation has changed, but regulations remain stuck in the past.” He continued, “Sunday sales are about 2.5 times the average weekday sales. We are required to close nearly half of the Sundays in a month, and even on Sundays when we operate, consumers are confused and unable to visit. This situation still persists. Unreasonable regulations must be improved even now.”

However, since amendments to the Distribution Industry Development Act are necessary in the National Assembly and opposition voices from self-employed and small business owners are strong, it is uncertain whether regulatory easing will materialize. The Korea Federation of Small and Medium Business said, “Mandatory holidays for large discount stores are the minimum safety net and last line of defense for establishing a sound distribution order, protecting workers’ health rights, and promoting coexistence and development between large stores and small distribution businesses,” adding, “If this last line is broken, local economies centered on neighborhood markets and traditional markets will face crisis, and the establishment of distribution order and coexistence development will regress.”

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