[Convenience Store Empire] "Yesterday buying luxury bags, today sending parcels... New city rulers"

①Convenience Stores as New Urban Infrastructure with Condensed Daily Life Services

Proximity, Diverse Product Assortment, Increase in 1-2 Person Households, Prolonged COVID-19
Convenience Store Sales Surpass Large Marts...Changing Retail Industry Landscape
Expanding Roles Beyond Daily Necessities to Department Stores, Banks, Community Centers, Post Offices
50,000 Convenience Stores + Online Subscription and Reservation Sales...Strengthening Young Loyal Customers
Over 60% of Sales from Ages 20-30... "Future Generations' Influence Will Grow"

<This dense network of convenience stores is evolving beyond just being neighborhood shops selling daily necessities. As the boundaries of product categories blur, luxury goods, mobile homes, and electric vehicles have all appeared on convenience store sales lists. They have absorbed the roles of restaurants, cafes, department stores, banks, post offices, community centers, and police stations. They are also exerting influence beyond offline spaces into the online realm. Downloading convenience store applications (apps) is essential to use subscription services or purchase limited-edition products. The 20s and 30s generation, familiar with online and mobile culture, skillfully utilize these apps to claim their share. For teenagers, convenience stores have replaced the old stationery shops as a ‘playground for consumption.’ It is common among teens to be the first to try new products and share them on social networking services (SNS). Convenience stores have permeated deeply into our lives to the extent that not using them even for a day causes inconvenience. These changes are even reshaping the distribution industry landscape. Last year, convenience store sales surpassed those of large supermarkets for the first time. Convenience stores also have strengths in logistics and delivery infrastructure, which are considered core competitive advantages in the distribution industry, from traditional channels to startups. This is because their store networks, located in prime spots, can be used as intermediate logistics hubs. Recently, convenience stores have been experimenting with cutting-edge delivery methods using autonomous robots and drones to overcome regional and distance limitations. The ‘world where convenience stores dominate cities, the convenience store empire’ is no longer a science fiction story. Already deeply embedded in our lives, where will convenience stores evolve next, and how will they change our lives? What big picture are they drawing now, and what are they preparing for? >>

[Asia Economy Reporter Kim Yuri] The following is a list of places ‘Kim Pyeon-ui’ (a pseudonym for an urban dweller) visited over a week. Where could these places be?

1. The place where they bought a luxury clutch they had been eyeing, splurging on a ‘gift for themselves’

2. The place they visited to rent expensive golf equipment because buying it all at once was burdensome as a ‘golini’ (beginner golfer)

3. The place they urgently visited to reissue a frequently used check card that suddenly stopped working while out

4. The place they sent a parcel for a friend living in the provinces who was celebrating a birthday

5. The place where they had a meal and coffee in the era of ‘lunchflation’ (lunch price inflation)

From 1 to 5, you might think of a department store, rental shop, bank, post office (parcel service), and restaurant or cafe, respectively, but you would be wrong. In Seoul, these places can be found within walking distance even in slippers and bare-faced, with as many as five or six stores easily accessible, and they are established as far as Marado beyond Jeju Island. The correct answer is all ‘convenience stores’. [Related article] ‘Convenience Store Empire’

◆Convenience stores surpass large supermarkets in sales... Changing landscape of the distribution industry

It is the era of 50,000 convenience stores nationwide. There is only one convenience store per 1,000 people. Especially in cities like Seoul, where stores are concentrated, people visit several times a day, and convenience stores have deeply penetrated daily life.

As convenience stores evolve into new urban infrastructure, the distribution industry landscape is also changing. Factors such as their location within living areas like homes, schools, and offices, the diversification of product and service assortments, and the increase in single- and two-person households preferring small-packaged, convenient products have all increased foot traffic to convenience stores. The prolonged COVID-19 situation has accelerated this trend.

At CU, from the beginning of this year until July 20, sales of agricultural, livestock, and fishery products increased by 39.5%, vegetables by 31.4%, fruits by 28.8%, and grains by 17.5% compared to the same period last year. During the same period, GS25 saw vegetable sales rise by 52%, livestock products by 45.9%, and fruits by 39.1%. Convenience stores are expanding their role from places to quickly buy a drink while passing by to channels for grocery shopping near home.

In this context, last year convenience store sales surpassed those of large supermarkets for the first time. According to the Ministry of Trade, Industry and Energy, last year the combined sales of the three major convenience store chains?CU, GS25, and 7-Eleven?accounted for 15.9% of the total distribution industry, surpassing the three major large supermarkets (E-Mart, Lotte Mart, Homeplus) at 15.7%. Among offline distribution channels, department stores ranked first (32.9%), followed by convenience stores (30.7%) and large supermarkets (30.4%). Since this reorganization in 2020, convenience store sales increased by 6.8% last year compared to the previous year, while large supermarket sales decreased by 2.3%. A similar trend continues this year. According to the Ministry’s ‘Major Distribution Companies Sales Trends in the First Half of the Year,’ convenience store sales increased by 10.1% in the first half of this year, while large supermarket sales decreased by 1.5%.

◆Condensed lifestyle services...Convenience stores as new urban infrastructure

The industry expects the expansion of convenience store roles to accelerate. Convenience stores are expanding beyond selling simple meals and daily necessities to include restaurants, cafes, banks, community centers, post offices, and flower shops, condensing lifestyle-related services and growing from ‘places you can drop by’ to ‘places you must drop by.’

Mobile homes and electric vehicles are products introduced by the convenience store industry ahead of this year’s Chuseok holiday. The boundaries of product categories and prices at convenience stores are breaking down. CU launched mobile homes priced between 15.6 million and 22.65 million KRW as Chuseok gifts this year. These products have been sold since last Lunar New Year. They also prepared limited quantities of luxury plants worth up to 2.9 million KRW. GS25 introduced ultra-high-end wine ‘DRC Roman?e-Conti 2017’ priced at about 79 million KRW and a one-month living experience package in Jeju Island. 7-Eleven sells about 20 luxury brand bags and wallets from Gucci, Yves Saint Laurent, Prada, and others. E-Mart24 prepared electric vehicles.

Beyond one-time special sales, convenience stores are evolving into lifestyle hubs that substitute for department stores, banks, and community centers. Convenience stores replace department stores for luxury goods purchases. GS25 started selling luxury goods regularly in October 2020, the first in the industry, selling more than one luxury item per week on average. They also have rental shop capabilities. CU rents out about 300 latest products such as game consoles, beauty devices, camping equipment, and sports goods, allowing customers to try before buying.

Convenience stores that function as actual bank branches are increasing through partnerships with Shinhan Bank, Hana Bank, and others. CU is expanding Hana Bank financial-specialized convenience stores starting in Songpa-gu, Seoul. Customers can perform tasks that previously required visiting a branch, such as account opening, passbook reissuance, check card and security card (OTP) issuance, through consultations with bank staff. GS25, in cooperation with Shinhan Bank, has installed digital desks and smart kiosks for video consultations, enabling most branch counter services including loans. They also partner to accept payments for public utility bills and taxes from 101 institutions.

They also serve as community centers. 7-Eleven currently offers civil document printing services at about 1,500 stores. Basic civil documents such as resident registration certificates, family relation certificates, as well as various government services including building registers, vehicle registration certificates, and business registration certificate reissuance through Government24, Hometax, and court registries are all available. They also play a role as local community safety platforms like police stations. CU operates the missing person prevention reporting system ‘iCU.’ So far, over 120 people have been reunited with their families through this system.

◆Over 60% of sales from 20s and 30s... Growing influence of future generations

Convenience stores are expanding loyal customers, especially among young people, by strengthening subscription and reservation sales using online platforms beyond their 50,000 offline stores. Currently, the main customer base of convenience stores is the 20s and 30s generation. According to CU, in the first half of this year, the sales share by age group was highest among people in their 30s at 30.7%, closely followed by those in their 20s at 30.6%.

A distribution industry insider said, “While older generations tend to perceive convenience stores as places to buy daily necessities at high prices in a hurry based on past stereotypes, younger generations use convenience store apps to subscribe to frequently used items like coffee and lunch boxes at discounted prices and purchase limited-edition products, utilizing them in various ways. Although sales from teenagers are currently small, their influence is comparable to other generations as they consider convenience stores ‘places they must stop by on their way home from school.’ When they become the mainstream generation, the influence of convenience stores in the distribution industry will grow even more.”