[Exclusive] Removed '10% Mandatory Burden on Small Business Owners' for Prepaid Gift Certificates... Existing Franchise Campaign Abandoned

Issuance of 100 Billion Won 'Prepaid Gift Certificates' Since 28th Last Month
Small Business Owners Oppose Existing Prepayment Campaign's 'Merchant Participation Consent and Pledge'... Planned Until 27th but Halted
Revamped After About 3 Weeks, Merchant '10% Mandatory Benefit' → '10% Payback on Usage Amount'... Shift to Alleviate Small Business Burden
Some Small Business Owners "Unaware of Revamp Details"... Concerns Over Confusion

On the 22nd, as social distancing measures to prevent the spread of the novel coronavirus infection (COVID-19) continue, the food street in Mapo-gu, Seoul, appears quiet. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Lim Cheol-young] To support small business owners classified under restricted industries and whose consumption has shrunk due to the novel coronavirus infection (COVID-19), Seoul City has removed the condition of a ‘mandatory additional 10% benefit for participating stores’ from the 100 billion KRW scale ‘prepaid gift certificates’ that began issuance last month. Accordingly, the ‘Seoul Zero Pay Prepayment Campaign Merchant Participation Consent and Pledge’ procedure, which Seoul City planned to conduct until the 27th, has effectively been abandoned.

According to Seoul City on the 25th, the city deleted the ‘mandatory additional 10% benefit for participating stores’ item from the prepaid gift certificate campaign, which has been sold since last month under the slogan ‘Zero Pay supports small business owners,’ and changed it to the ‘Seoul Love Gift Certificate 10% Payback Benefit.’ The participation campaign, which had been conducted for about three weeks targeting small business owners in affected industries, was halted, shifting toward reducing the burden on small business owners.

The ‘prepaid gift certificates’ were issued with the goal of supporting small business owners affected by COVID-19 by investing a separate city budget of 10 billion KRW, but soon faced backlash. Small business owners opposed the mandatory clause requiring a ‘10% additional benefit for participating stores,’ which led to low participation. The number of stores participating in the campaign before the change was only about 10,000, far below the 130,000 Zero Pay affiliated stores in affected industries.

A Seoul City official explained, “We decided to implement the campaign only for stores that applied to participate, but participation was low,” adding, “There were many objections from small business owners about the mandatory requirement for store owners to provide consumers with a 10% benefit, so we decided to change the implementation.” He further added, “The campaign planned to run until January 27 has effectively lost its meaning.”

Accordingly, Seoul City revamped the ‘Seoul Zero Pay Prepayment Campaign Merchant Participation Consent and Pledge’ procedure to remove the mandatory burden on small business owners and opened it to 130,000 Zero Pay affiliated stores in affected industries. The minimum payment amount of 100,000 KRW was removed, and the validity period for using the gift certificates was extended by two months from January 31 to March 31. This reflects various complaints from small business owners.

Mr. J, who has been operating a store in Jung-gu, Seoul for four years, said, “Even though the profit margin is only around 10%, I reluctantly bore the burden and participated in the campaign, but I’m relieved that Seoul City’s policy has been changed, even if belatedly,” adding, “I regret that Seoul City did not broadly incorporate small business owners’ opinions from the preliminary stages of the policy.”

However, confusion among frontline small business owners regarding the revised ‘prepaid gift certificate’ usage conditions, which were changed just three weeks after implementation, is likely to continue for some time. At frontline stores, the revised details have not been accurately communicated to small business owners who participated in the earlier campaign, and consumers still do not recognize that the ‘mandatory additional 10% benefit for participating stores’ has been removed.