[Viewpoint] A Glimpse into the Data Age Through the Conflict Between Convenience Stores and Delivery Apps

The hallmark of the digital age is the end of boundaries between industries. In the analog era, industries existed like solids within segmented areas, but in the digital age, they become fluid like liquids, mediated by information technology and data. As previously separated sectors approach each other and boundaries blur, industrial structures change. The convergence of broadcasting and telecommunications, healthcare and home appliances, distribution and logistics has already become part of everyday life. The recent conflict between convenience stores and delivery apps is also in the same context and exemplifies the tangible value of data, a core asset in the digital age.

Major domestic delivery apps launched 'convenience store delivery services' last year. This service delivers convenience store items ordered online by consumers. Convenience stores have excellent accessibility due to their proximity to living spaces, but offline characteristics require consumers to visit the stores themselves. Delivery apps expanded the market by linking a dense network of convenience store locations for rapid delivery. Convenience stores also benefited mutually by generating additional sales through online delivery.

The conflict began when Yogiyo entered the Yomart business in September, delivering items similar to those sold at convenience stores. The convenience store industry opposed this, arguing it reduces sales at existing stores and expressed concerns about the potential use of consumer data accumulated through convenience store deliveries for business purposes. They also pointed out unfairness in Yomart being prioritized on Yogiyo’s customer interface. In response, Yomart stated that it is a separate corporation from Yogiyo, which operates the delivery app, making data sharing impossible, and that they plan to improve the app interface issue.

Viewing this conflict from the perspective of industrial changes during the digital upheaval reveals two trends: 'the end of boundaries between distribution and logistics' and 'the importance of data assets.' In the analog era, logistics was merely a subordinate function of distribution businesses. When operators expanded offline store networks, logistics supported them from the rear. However, with the advent of online distribution, distribution and logistics began to merge, and eventually, logistics took the lead, absorbing distribution in a reversal phenomenon. This is because the center of customer contact in the distribution industry shifted from offline stores to online screens in cyberspace. Until now, large stores such as marts and discount stores were directly affected by the expansion of online distribution, but now this wave of change is also reaching convenience stores, which had been somewhat outside this trend.

It is also a case that re-recognizes the value of data assets in the digital age. The success or failure of all businesses is determined by superiority at customer contact points. In the analog era’s distribution industry, the core asset was the location of offline stores, but in the digital age, it is the acquisition of customer information. Even convenience stores densely located near residential areas are a sign that they cannot compete against the customer data secured by delivery apps. If the core assets of companies in the analog era were tangible assets such as 'land, labor, and capital,' in the digital age, they are transforming into cyber assets like 'data and algorithms.'

As existing boundaries between industries disappear and converge, the competitive landscape and methods of companies in the digital age are rapidly changing. Especially in the distribution industry, digital upheaval accelerated around the COVID-19 pandemic, causing individual companies to carefully consider their response strategies. Related policies must also take these changes into account to be effective. In this regard, the recently proposed amendment to the 'Distribution Industry Development Act' in the National Assembly reflects the outdated nature of Korea’s policy concepts. In particular, the provision banning new large marts and shopping malls within a 20 km radius of traditional markets to protect small merchants is an anachronistic idea. It is disconnected from the trend where distinctions between offline and online, distribution and logistics are disappearing. The conflict between convenience stores and delivery apps is a localized issue, but policies attempting to regulate the 21st century with 20th-century thinking risk not only halting progress but also destroying the industrial ecosystem itself. Furthermore, the harmful effects of such regressive approaches are unlikely to be limited to the distribution industry alone.

Kyungjun Kim, Vice Chairman, Deloitte Consulting