"10 Years of Distribution Regulation... Surrounding Commercial Areas Decline Alongside Large Mart Closures"

Research Results on Korean Distribution Studies
'10-Year Evaluation of Distribution Regulations and Win-Win Strategies'
Based on Credit Card Big Data
Sales Trend Analysis of 7 Closed Large Mart Stores

[Asia Economy Reporter Cha Min-young] A research statistic revealed that after the closure of large discount store branches, the sales of surrounding commercial districts within 1Km, including supermarkets and restaurants, dropped by nearly 5%. Since the strengthening of distribution regulations in 2012, large discount store closures have continued, raising concerns that such regulation-focused policies have not led to meaningful win-win outcomes.

On the 25th, according to the '10-Year Evaluation of Distribution Regulations and Win-Win Measures' research analysis data submitted by the Korea Distribution Association to Han Mu-gyeong, a member of the People Power Party, an analysis using credit card big data on seven recently closed large discount store branches showed that large discount stores contribute to the revitalization of local commercial districts.

When sales two years before the closure of a large discount store were set to 100, sales in the surrounding commercial districts decreased by 4.82% within a 0?1Km radius and by 2.68% within a 1?2Km radius after the closure of one large discount store branch. Although sales increased by 5.62% and 2.49% in the 2?3Km and 3?4Km zones respectively, the growth rate slowed compared to the annual growth rate before closure. Converted into monetary terms, the closure of one large discount store branch results in a sales decrease of 28.5 billion KRW in the surrounding commercial districts within a 0?3Km range.

Furthermore, it was found to have a negative impact on both direct and indirect employment related to large discount stores and the surrounding commercial districts. Since it affects not only the direct employees of the large discount store branches but also tenant lease businesses, service companies, and suppliers, it is analyzed that when a large discount store branch with average sales of 50 billion KRW closes, 945 jobs are lost in the large discount store alone. In supermarkets, 237 jobs, and in restaurants, 690 jobs are lost, totaling 1,374 jobs lost including direct and indirect employment.

An analysis of the impact by day of the week due to mandatory closure days was also presented. The analysis of the impact on surrounding commercial districts according to the mandatory closure day of large discount stores showed that commercial districts around stores with Sunday closures experienced a significant increase in sales decline (8?25%) and an increase in online consumption. In contrast, areas with Wednesday closures showed increasing sales in surrounding commercial districts over time (11.0%, from 2013 to 2018). This is contrary to the intent of the current Distribution Industry Development Act, which designates Sunday as the mandatory closure day.

Assembly member Han Mu-gyeong stated, “Consumer behavior has diversified compared to the past, so related policies must evolve accordingly,” and added, “Due to the rapid growth of online consumption driven by consumer needs, difficulties for offline distribution businesses such as traditional markets and large discount stores are intensifying, so we must move away from the past framework of strengthening regulations.”

She continued, “It is necessary to foster a distribution industry culture where all parties forming the distribution ecosystem?including consumers, small and medium distribution, large distribution, large and small suppliers, tenant merchants, and workers?make mutual concessions and ultimately benefit each other,” emphasizing that she will promote policy development and discussions aligned with this goal.