"Survival Difficult Without Disruptive Innovation"…Retail Industry Focuses on Next Year's Strategy Discussions

KCCI's '2025 Retail Industry Outlook Seminar'

The distribution industry discussed disruptive innovation and the utilization of artificial intelligence (AI) technology for survival amid rapidly changing market conditions.

The Korea Chamber of Commerce and Industry (KCCI) held the '2025 Distribution Industry Outlook Seminar' on the 2nd at the Seoul Chamber of Commerce building, exploring changes and survival strategies surrounding next year's distribution market. About 500 participants from manufacturing, distribution, logistics, and finance sectors attended the event.

The KCCI stated, "Due to U.S. protectionism, tariff increases, and escalating U.S.-China trade conflicts, concerns over the slowdown of South Korea's exports and rising inflation are growing," adding, "The distribution industry is responding to the rapidly changing environment with new strategies such as 'department store name changes' and 'introduction of AI shopping assistants.'"

In the keynote speech, Ji-yeon Song, partner at BCG Korea, said, "The essence of the distribution industry is that if you fail to evolve by reinventing yourself, you will lose your position to new players," emphasizing, "You must quickly break away from past success formulas and carry out disruptive innovation to survive." She stressed, "Offline distribution must abandon the past store-centric formula and shift to customer-centric thinking," adding, "Without thinking and changes based on data and customer insights rather than price and cost competition, survival will be difficult to guarantee." Regarding e-commerce innovation, she said, "It is necessary to provide personalized, customized experiences and commerce that includes fun and stories," and "A new operating model that makes all this possible is needed."

The department store industry expects the polarization of commercial districts between the metropolitan area and provinces to deepen next year. In-ho Kim, vice chairman of Business Insight, predicted, "The Big 3 (Lotte, Shinsegae, Hyundai) will strengthen restructuring targeting stores that fall behind in competition, marking the start of a full-scale second reorganization." The keywords for department store changes were 'name changes' and 'Townification.' Townification refers to a strategy of transforming a simple shopping space into a complex cultural space with various functions. In fact, Hyundai Department Store renamed its Daegu branch to 'The Hyundai Daegu,' its Busan branch to 'Connect Hyundai,' and Shinsegae renamed its Gyeonggi branch to 'Shinsegae South City,' strengthening their brands.

Convenience stores are expected to perform well despite negative factors such as minimum wage increases and intensified competition. Jong-ha Shin, director at BGF Retail, analyzed, "The more negative the economic situation, the more consumers tend to make small purchases nearby, likely absorbing sales from other retail sectors."

2025 Retail Market Outlook by Business Type. Provided by the Korea Chamber of Commerce and Industry

Large supermarkets are expected to grow by 0.8% next year. Kyung-hee Lee, director of Emart Distribution Industry Research Institute, said, "Maintaining demand for home meals and new store openings are positive factors," adding, "Strengthening competitiveness in the food category is key to improving performance."

Sun-kyu Hwang, head of the Korea Duty Free Shop Association, evaluated this year's duty-free market as extremely deteriorated. He expressed concern, "Due to China's policy to expand downtown duty-free shops, the possibility of withdrawal from the domestic duty-free market is increasing, and difficulties are likely to continue next year."

In online shopping, shopping assistants incorporating generative AI technology are gaining attention. Mia Lee, researcher at Seoul National University Institute of Human Ecology, said, "Generative AI technology enables conversational search instead of keyword search," adding, "Consumer experience will be dramatically improved."

Min-seok Kim, team leader of the Distribution and Logistics Policy Team at KCCI, emphasized, "In a situation where domestic and international economic uncertainties are increasing, it is necessary to closely analyze U.S. policy directions and prepare countermeasures."