[Inside Chodong] Regulations More Frightening Than Competing With Japan, the "Convenience Store Giant"

Number of Korean Convenience Stores Surpasses Japan, the Birthplace of Convenience Stores
Japan's Declining Store Numbers Could Foreshadow Korea's Future
Industry Needs Fostering Policies, Not Just Regulations

Korean convenience stores have surpassed those in Japan. According to the "May Convenience Store Statistics Monthly Report" recently released by the Japan Franchise Association, the number of convenience store outlets in Japan last month was 55,641. Meanwhile, according to the Korea Convenience Store Association, as of the end of last year, the number of domestic convenience stores (CU, GS25, Seven-Eleven, Emart24, C Space24) was 55,580. As of the end of last month, there is only a difference of 61 stores between the number of convenience stores in Japan and Korea.

The domestic convenience store industry compiles the number of stores only once a year to prevent cutthroat competition. However, the industry already believes it has surpassed Japan. The increase in domestic convenience store outlets was about 2,600 in 2021, about 3,360 in 2022, and about 1,400 last year. Considering this trend, the number of domestic stores has already exceeded that of Japan, the "originator of convenience stores."

Convenience stores were born in the 1920s in the United States as the number of automobiles rapidly increased. In Japan, Seven-Eleven opened its first store in Tokyo in 1974. Seven-Eleven originated from the "Southland Ice Company," established in the U.S. in 1927. It later expanded into Japan, and in 2005, Japanese Seven-Eleven acquired all shares, becoming a Japanese company. Japan surpassed U.S. convenience stores in 31 years.

In Korea, the first Lotte Seven store opened in 1981 but withdrew due to poor business performance. Later, in 1989, the first Seven-Eleven Korea store opened in the Olympic Athlete Press Village shopping area in Oryun-dong, Songpa-gu, Seoul. In 35 years since then, the number of convenience stores has grown enough to surpass Japan's.

Japan has more than twice the population of Korea and a larger land area. However, due to labor shortages caused by aging, the number of stores is decreasing. According to Kyodo News, more than 80,000 foreigners work at Japan's three major convenience store chains due to aging and labor shortages. In one store in Chuo-ku, Tokyo, 80% of employees are foreigners, and Ministop has seen a 1.4-fold increase in foreign employees over five years. KOTRA diagnosed in last year's report "Trends and Challenges in the Japanese Franchise Industry" that "the current Japanese franchise industry needs solutions to labor shortages."

This aging issue is not someone else's problem. Looking at the total fertility rate in 2023, Korea is 0.72, and Japan is 1.20. Although population aging started earlier in Japan, Korea's aging speed is much faster. The slowdown of the Japanese convenience store market will soon happen in Korea.

Nevertheless, Korea continues to focus policies solely on regulating convenience stores. Policies block disposable product regulations, sales of over-the-counter drugs, and new store openings. Recently, there have been additional regulatory moves in the political sphere. Representative examples are amendments to the Franchise Business Act and the Labor Standards Act. The most shocking regulation is the amendment to the Labor Standards Act. It designates industries that must work on weekends and guarantees workers who work weekends at least one consecutive weekend off per month (16 times a year), abolishes substitute holidays, and mandates Sunday holidays. It also pushes for provisions to pay extra allowances to all workers who work on weekends. Convenience stores operating 24/7 year-round are expected to be the hardest hit.

Korean convenience stores are still growing, but the future is uncertain. Rather than being held back by regulations, urgent discussions on how to survive and foster the industry are needed.