[Report] "Nothing Left After All Costs" Labor Costs and Electricity Bills Worry Convenience Store and PC Bang Industries' Sighs

Electricity Rates to Rise from July, 24-Hour Convenience Stores and PC Bang Industry 'Concerned'
Heatwave Intensifies but Support Limited... "Hope for Increased Headquarters Support"
Worries Over Labor Costs Ahead of Minimum Wage Review, Burden on Store Owners Grows

Amid expectations of severe heatwaves, concerns are rising about the heavy electricity bills from air conditioner use. The photo is unrelated to specific expressions in the article. Photo by Kim Jeongwan kjw106@

[Asia Economy Reporter Kim Jung-wan] As the government has decided to raise electricity rates starting next month, concerns are emerging from the convenience store and PC bang industries, which operate 24 hours a day. With ongoing labor-management conflicts over next year's minimum wage increase, worries about labor costs are adding to the burden.

According to Korea Electric Power Corporation on the 29th, the fuel cost adjustment rate for electricity bills will increase by 5 won starting in July. Originally, the fuel cost adjustment rate was allowed to fluctuate by up to ±3 won per kWh compared to the previous quarter, with an annual maximum of ±5 won. However, the system was improved to allow quarterly adjustments within the annual adjustment range, leading to the decision to raise the rate by the maximum annual increase of 5 won.

In response to this decision, the convenience store and PC bang industries have expressed concerns about the heavy burden of electricity bills, especially for air conditioning. With a heatwave expected ahead of summer and 24-hour operations, a surge in electricity costs is anticipated. For convenience stores, operating profit margins remain steady, but support measures related to electricity costs are actually decreasing, increasing worries among store owners.

Mr. Yoo, in his 50s, who runs a convenience store in Mapo-gu, Seoul, said, "This year’s heatwave is severe, and the electricity bill is rising immediately, so I am very worried. The profits earned from sales are limited, so I hope the headquarters increases support measures during such intense heat."

CU, the industry leader, has eliminated the monthly electricity bill support of 300,000 to 400,000 won for 24-hour franchise stores. Although a new product support fund of up to 150,000 won per month was introduced, it can only be received if more than 80% of the orders are for new products recommended by the headquarters. GS25 supports 5% of sales profit (sales minus cost) as an operating incentive, and Seven Eleven covers 50% of the store’s electricity bill. Last year, the operating profit margins of major convenience store companies were CU 2.9%, GS25 3%, and Seven Eleven 0.04%.

Meanwhile, the heatwave is expected to continue from late summer to early autumn this year. According to the Korea Meteorological Administration, the probability that the average temperature from July to September will be higher than normal is 50%, and the probability that it will be normal or higher is 80%. The number of days with abnormal high temperatures is also expected to increase, with a 50% chance of being higher than usual.

With the minimum wage decision for next year approaching, concerns about labor costs combined with the burden of electricity bills are leading some to consider closing their stores. In the previous minimum wage deliberations, the business sector proposed maintaining this year’s rate of 9,160 won, while the labor sector suggested an 18.9% increase to 10,890 won. Due to the nature of 24-hour operations, increases in labor costs directly affect profits.

Mr. Choi, 47, who runs a convenience store in Eunpyeong-gu, said, "Even if sales are high, after paying the headquarters, hourly wages, and weekly holiday allowances, there is little left. If the minimum wage goes up, I am considering running the store with family members. Now with the electricity bill increasing as well, I have no choice but to think about closing the store," he sighed.

As discussions on next year's minimum wage continue, concerns are being raised that the burden on convenience stores and PC rooms operating 24 hours a day is increasing.
Photo by Kim Jeongwan kjw106@

Mr. Ha, in his 40s, who operates a PC bang, said, "Nowadays, food is an important factor in PC bangs, so there are limits to switching to unmanned operations like kiosks. We are already very concerned about the minimum wage increase, and now with electricity rates rising, the burden is indeed growing. Who would want to come during the hot summer? I am worried about how high the bills will be," he lamented.

Meanwhile, convenience store owners have demanded government measures following the decision to raise electricity rates and the increasing likelihood of a minimum wage hike. On the 28th, the Convenience Store Owners Association announced that the average monthly sales of convenience stores in the first half of this year were 43.57 million won. Of this, the profit taken by the store is about 9.15 million won, and after deducting labor costs, rent, and other expenses, the association claims that the amount left for the store owner is almost nothing.

The association stated, "Due to the 24-hour operation characteristic, convenience stores are more sensitive to increases in labor costs and electricity bills than other self-employed businesses. Additionally, they are the first industry to reflect consumption contraction caused by inflation. Convenience stores are facing a crisis of extinction due to electricity rate hikes, minimum wage increases, and consumption contraction from inflation. We urge the government to prepare countermeasures," they urged.