[Trap of Regulation] Experts Say "Large Marts and Local Markets Are Not a Zero-Sum Game"

Policy Effect Verification Should Precede Bill Discussions
Large Stores Bring Advantages in Revitalizing Commercial Districts
Forced Store Closures Should Not Restrict Consumer Rights

A large supermarket store in Seoul that has closed its doors./Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Seungjin Lee] Experts have criticized the Distribution Industry Development Act (Distribution Act) as a "law that does not make sense." The core of the Distribution Act is to regulate large stores operated by conglomerates to protect traditional markets and neighborhood businesses, but there are concerns that such regulations could actually lead to the decline of neighborhood businesses. Since mandatory closures of large marts have already been in place for over a decade, experts advise that the government and ruling party should first conduct a thorough investigation to assess whether the policy goals are being achieved before considering the effectiveness of the bill.

On the 14th, Professor Chochunhan of the Department of Business Administration at Gyeonggi Science and Technology University said, "The bill was proposed without any analysis of its effectiveness." Starting with restrictions on large mart openings in 2010, and enforcing mandatory closures twice a month in 2012, regulations on the distribution industry have become more stringent. Regarding this, Professor Cho explained, "Recent studies have shown that when large stores such as large marts open near neighborhood businesses, foot traffic actually increases, revitalizing the commercial area. We need to clearly revisit the controversies that have continued for the past 10 years."

Professor Cho recently used credit card data to investigate customers of complex shopping malls and outlets, finding that 7.43% of existing traditional market customers shifted to nearby complex shopping malls after large-scale store openings. However, the number of people visiting traditional markets from other regions to visit the complex shopping malls has increased. According to the survey, 11.83% were new inflows, indicating that complex shopping malls also contribute to the revitalization of traditional markets.

Professor Sung Tae-yoon of Yonsei University's Department of Economics also viewed the effectiveness of the Distribution Act skeptically. Professor Sung said, "Currently, all regulations focus only on large offline retailers, but changes in the market environment due to the development of online platforms have not been reflected. While discussions on coexistence are necessary, it is impossible to solve the issue through regulation alone."

Criticism also continued regarding the perspective that views the situation as a confrontation between large marts and neighborhood businesses. Professor Ahn Seungho of Soongsil University's Department of Business Administration explained, "Large marts or complex shopping malls have a significantly higher proportion of purpose-driven customers who visit with specific intentions, whereas traditional markets or neighborhood businesses have a higher proportion of non-purpose-driven customers who visit incidentally, so they are not substitutes for each other."

Professor Ahn further emphasized, "We must also accept the changes in consumers' lifestyles." He said, "It is an era where preferences have shifted from rice cakes to cakes, and from Makgeolli to wine. Forcing closures only restricts consumers' right to pursue happiness."

Experts stressed the need for a comprehensive review of the Distribution Act. Professor Cho argued, "When large marts are regulated, large food material marts that are not subject to regulation emerge, causing conflicts with neighborhood businesses. Since this is not a zero-sum game where one side's gain is necessarily the other's loss, we need to reconsider the issue from the beginning."

Professor Ahn suggested direct government support as an alternative to regulation. He said, "If the government has decided that traditional markets, which are naturally bound to decline amid the times and competition, must be preserved, then direct support rather than regulation is necessary. A long-term policy shift is required."

Finally, Professor Sung added, "Discussing coexistence and symbiosis by restricting specific business types or operations does not make sense. It is time to seek ways to grow through mutual competition."