[Viewpoint] The Supplementary Budget Must Be Expedited

In June 2023, I met Choi Joon-chul, CEO of VIP Asset Management, who was deeply interested in the distribution industry. He provided a clear and concise explanation of the overall Korean distribution sector. At that time, he mentioned the four great kings of Korean distribution. These four companies essentially dominate the industry. Offline, they are Olive Young, Daiso, and Costco; online, it is Coupang. In today's shorthand, it's 'Ol·Da·Co·Ku.'

#Olive Young (domestic IPO planned): Olive Young is a must-visit place for foreign tourists. It is the holy ground of K-beauty. Package products for foreign tourists sell like hotcakes. Olive Young is CJ's cash cow. Soon to go public through an IPO, Olive Young is a stock that investors must include in their portfolios.

#Daiso (unlisted): It stands shoulder to shoulder with Olive Young. The number of foreign tourists is increasing. Shopping malls are eager to host Daiso in a shop-in-shop format. Local residents near Daiso often visit casually. There are many innovative items, and even just window shopping takes quite some time. The average spending per customer is surprisingly high. If you buy 1,000-won items with the mindset of using and discarding them, you end up filling your basket with various things, quickly reaching 20,000 to 30,000 won. Daiso's sales are estimated to have exceeded 4 trillion won last year, aiming for 5 trillion won this year. It is a typical example of low margin, high volume.

#Costco (U.S. listed): As a membership-based store, customer loyalty is high. The average spending per customer is roughly one zero higher than Daiso and Olive Young. The entry criteria are strict, ensuring quality, and prices are reasonable because the distribution margin ceiling is set according to the founder's philosophy. The enormous stores are crowded even on weekdays and are so packed on weekends that there is barely room to move.

#Coupang (U.S. listed): Although Naver is fiercely chasing, Coupang has dominated the home turf. Consumers have ingrained the perception that if they order tonight or even early tomorrow morning, the package will be delivered to their doorstep by tomorrow morning. Once consumers get used to it, it is hard to break away. Coupang announced on the 26th that it surpassed 40 trillion won in sales for the first time last year and achieved operating profit for two consecutive years. It has experienced explosive growth at an average annual rate of 60% over 14 years.

About one year and eight months have passed since meeting CEO Choi. There has been little change in the four great kings' structure. Artbox and Musinsa have performed well, giving rise to the new phrase 'Ol·Da·A·Mu.'

These companies, which are thriving by building their own concepts and know-how, deserve praise. However, the underlying meaning must be examined. The prominence of the four great kings reflects the polarization of the distribution industry and symbolizes the sinking of numerous self-employed small business owners represented by mom-and-pop stores. According to a survey conducted by the Korea Economic Association and Mono Research targeting 500 self-employed individuals, more than four out of ten self-employed people are considering closing their businesses within the next three years, indicating they are in dire straits. Considering that one in five employed persons is self-employed, their collapse would deal a severe blow to the national economy. Various indicators are indeed bleak. In particular, the Bank of Korea's significant downgrade of this year's growth rate from 1.9% to 1.5% on the 25th can be considered a shock.

Policies to revive domestic consumption are urgently needed. The supplementary budget (Chugyeong) currently being discussed actively by the government and political circles must therefore be expedited. It usually takes about two months from drafting to approval of the supplementary budget. There is no time for bickering.