National Assembly Legislative Research Office "Positive Review of Online Sales on Large Mart Closure Days"

Large Mart, SSM, Small Merchants, and Traditional Markets All Impacted
"Weekday Mandatory Closure Designation Must Be Considered Comprehensively"

The National Assembly Legislative Research Office has expressed the opinion that online sales (telecommunication sales) should be positively considered even during restricted operating hours and mandatory closing days for large discount stores. Although 12 years have passed since the enactment of the Distribution Industry Development Act, which includes regulations on operating restrictions, analysis shows that contrary to the original legislative intent, not only large discount stores and semi-large stores (SSM) but also traditional markets and small business owners have been adversely affected. The Legislative Research Office's opinion is attracting attention as it may serve as a reference in future National Assembly law amendment discussions.

According to the distribution industry on the 13th, the Legislative Research Office recently published a report titled "Analysis of Retail Industry Trends and Legislative and Policy Response Measures" containing these details.

The report pointed out that the Distribution Industry Development Act, which regulates the monopoly of large discount stores and SSMs, has rather led to stagnation in the related industries. According to the Ministry of Trade, Industry and Energy's "Major Distribution Companies Sales Trend Survey," the sales of large discount stores increased until 2011 but decreased annually by an average of 3.2% from 2012 to 2021, with increases of 1.4% in 2022 and 0.5% last year.

The sales of SSMs, for which data has been published since 2014, decreased every year except from 2017 to 2019, declining by an average of 2.1% annually from 2014 to 2022. Last year, sales increased by 3.7%. In contrast, online distribution companies' sales have increased every year. Accordingly, the share of online distribution companies in total sales of major distribution companies increased from 28.4% to 50.5% during the same period, while the share of large discount stores decreased from 27.8% to 12.7%, and that of SSMs decreased from 5.2% to 2.7%.

Small business owners have suffered even more severe damage. According to the Statistics Korea's "Service Industry Trend Survey," using 100 as the base in 2020, the sales index of "general supermarkets and variety stores" has continuously declined from 116.0 in 2010 to 86.1 last year. The report added, "Although the growth of online distribution has reduced the share of large discount stores and SSMs, the position of small business owners operating general supermarkets and variety stores has weakened even more severely."

The situation is similar for traditional markets. According to the Small Enterprise and Market Service's survey, the number of traditional markets increased from 1,372 in 2013 to 1,450 in 2017 but has continued to decline except in 2021. It decreased to 1,388 in 2022. Traditional markets must meet requirements such as an area of at least 1,000㎡ and at least 50 stores. The report noted that as online distribution develops and commercial districts shrink, the number of markets failing to meet the legal requirements for traditional markets is increasing.

The report pointed out that the operating restrictions on large discount stores through the Distribution Industry Development Act have caused side effects of contraction in large discount stores, SSMs, small business owners, and traditional markets, thus necessitating legal amendments. Especially considering that online malls can operate 24 hours a day, the current law has discriminatory elements, and it should positively consider lifting operating restrictions for online sales.

In particular, as the e-commerce market expands, companies operating large discount stores or SSMs have actively entered the related market and have already established themselves as major competitors in online distribution, making legislative regulation meaningless. The Legislative Research Office stated, "Large distribution companies operating only online malls are not subject to operating hour restrictions and can conduct telecommunication sales 24 hours a day every day," adding, "Therefore, to ensure fair competition among large distribution companies and expand consumer choice in local areas, allowing telecommunication sales during restricted operating hours and mandatory closing days can be positively considered."

However, the report advised that the plan to abolish the principle of designating mandatory closing days as public holidays should "comprehensively consider social benefits from increased consumer purchasing convenience, the management status of small business owners, the ripple effects of expanded public holiday operations, and the impact on workers' health rights."

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