Unexpected Bid Result for Prime 'Hangang Riverside Kiosk'... All Convenience Stores Fail to Win Contract

On March 29th, Seoul Yeouido Hangang Park was bustling with visitors enjoying an outing. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Seungjin Lee] An unexpected result occurred in the bidding for the selection of operators for six convenience stores along the Han River, each with annual sales exceeding 1 billion KRW. The existing operator GS25 did not participate in the bidding, and convenience store chains such as CU, 7-Eleven, and Emart24 all failed to win the bids.

According to the convenience store industry and the Han River Project Headquarters on the 13th, all three zones were successfully bid on in the '2020 1st Han River Riverside Store Usage Permission Operator Selection Bidding' which closed on the 12th.

The bidding targets were six convenience stores along the Han River: Ichon 1 and 2 branches, Jamwon 1 and 3 branches, and Yanghwa 1 and 2 branches, all previously operated by GS25. The bidding was conducted in three zones: Zone 2 (Ichon 1 and 2 branches), Zone 3 (Jamwon 1 and 3 branches), and Zone 4 (Yanghwa 1 and 2 branches). Convenience store chains such as CU, 7-Eleven, and Emart24 participated in some zone bids but all failed to win.

Zones 2 and 3 were awarded to Gongwoo ENC, a subsidiary of the Military Mutual Aid Association. Zone 2 was won at 603.06% of the minimum bid price of 190.87 million KRW, amounting to 601.36 million KRW. The winning bid for Zone 3 was 835.26 million KRW, nearly four times the minimum bid price of 214.47 million KRW.

Zone 4 was awarded to a private corporation at 551 million KRW, which is 312.36% higher than the minimum bid price of 176.4 million KRW. The final operators were all selected based on the highest bid exceeding the minimum annual usage fee.

The convenience store industry expressed surprise at this bidding outcome. Despite the impact of the novel coronavirus disease (COVID-19), competition was fierce, with a maximum competition rate of 12 to 1. Moreover, although Han River convenience stores are considered prime locations, the bids approached nearly four times the minimum bid price despite the short three-year operation period.

GS25’s decision not to participate in the bidding was also unexpected within the industry. The Han River convenience stores have been limited to a total of 29 stores, making competition intense.

Han River convenience stores see significantly higher sales during peak outing seasons and have high symbolic value, providing brand promotion benefits. The self-regulatory restrictions on new convenience store openings have also increased the popularity of Han River convenience stores. Regarding this, a GS25 representative briefly stated, "After internal review, it was concluded that not participating in the bidding was appropriate."

Meanwhile, the successful bidders will operate the stores for the next three years after completing signboard replacements and repairs by the end of this month. They may operate as sole proprietors or later enter franchise agreements with convenience store companies to run the stores as franchises. If operated as franchises, the bidders are expected to negotiate favorable royalty rates and other contract terms with the convenience store companies.