"Back to the Era of Bulk Buying Amid High Inflation"…Warehouse-Style Discount Stores Regain Spotlight

Popular Bulk Cost-Effective Products
New Openings Continue at Costco, Traders, Max, etc.
Growth Rate Slows Due to COVID Base Effect
Despite Mid-Long Term Appeal Decline from 1-2 Person Household Expansion
Strong Performance Amid Soaring Prices

As high inflation brings cost-effective (price-to-performance) products back into the spotlight, warehouse-style discount stores that handle large-capacity products with low unit prices are being reevaluated. The distribution industry is focusing on attracting loyal customers through 'exclusive products available only here' while also putting effort into expanding stores that offer unique experiences only available at these locations.

According to the distribution industry on the 20th, Costco is actively recruiting members ahead of the opening of its 18th domestic store, Gocheok Branch in Guro-gu, Seoul, next month. This new store opening comes two months after the launch of the Gimhae Branch in Gyeongnam last month. Costco is attracting customers by encouraging purchases of large-capacity products with strong price appeal through paid membership subscriptions. Typically, warehouse-style discount stores offer products at prices 8-15% lower than general discount stores. Additionally, consumer traffic continues unabated as shoppers seek exclusive products sold only at these stores, driving further new store openings. The opening of the Costco Cheongna Branch is scheduled for next year.

Earlier, at the end of June, Emart Traders also opened its 21st Traders store in Dongtan, Gyeonggi Province. By promoting private brand (PB) products and exclusive items, the store has exceeded sales targets more than two and a half months after opening. Traders is expected to open five additional stores by 2025. An Emart official said, "The newly opened Dongtan store has received positive responses from customers by offering large-capacity fresh and processed foods as well as unique attractions such as the 'Supercar Roadshow.'"

Lotte Mart is also continuing its renewal openings this year after rebranding its warehouse-style discount store Big Market to Max. In January, Songcheon, Sangmu, and Mokpo branches were renovated, followed by the Changwon Central Branch in March, and the Geumcheon and Yeongdeungpo branches are scheduled to reopen as Max stores within the year. While pursuing 'reasonable large-capacity' products suitable for families of three to four members, key stores have maximized customer attraction effects by introducing core content such as 'Bottle Bunker,' where customers can taste and experience various wines. The goal is to convert 20 stores to Max by next year.

Costco surpassed 5 trillion KRW in sales last year. Costco Korea's 2021 fiscal year (September 2020 to August 2021) sales reached 5.3523 trillion KRW, an 18.3% increase compared to the previous year. The COVID-19 pandemic, which increased the burden of going out, made the method of purchasing large quantities at once highly popular, playing a significant role in the strong performance.

Within the industry, there were expectations that warehouse-style discount stores' sales growth rates would slow significantly this year due to the 'COVID-19 base effect,' but from early this year, rapid inflation has brought cost-effective products into focus, and combined with the effect of new store openings, the sector is holding up well. Traders, which surpassed 3 trillion KRW in sales last year with a 14.5% growth rate compared to the previous year, experienced a monthly sales decline in November last year but turned positive again in June after seven months and is continuing to increase its growth rate. Last month, Traders' sales grew by 6.1% compared to the same period last year. Max also saw sales increase by more than 25% from January to August this year compared to the previous year. In particular, the Sangmu and Changwon Central branches, where Bottle Bunker is located, saw sales increases of 30% and 45%, respectively, significantly exceeding the average sales growth rate.

A distribution industry official said, "Although there are evaluations that the appeal may decline in the mid-to-long term due to the increase in one- to two-person households, interest in exclusive products and low prices continues in this high-inflation era. Unlike large supermarkets, warehouse-style discount stores, which continue to open new stores steadily, will evolve by expanding product competitiveness while adding 'experience content'."