3.5 Million Won to 81.7 Million Won Jump... On Large Mart Holidays, Crowds Flock to 'Here' Instead of Traditional Markets

KERI Analyzes 1.3 Million Consumer Purchases Annually
Over 10 Years of Mandatory Closure for Large Discount Stores, but No Effect
Offline Retail Sector Slumps as Online Shopping Surges
Other Countries Ease Regulations on Large Discount Stores Amid Changing Consumer Trends
"Policies Needed for Coexistence of Consumers, Traditional Markets, and Large Discount Stores"

The 'Mandatory Closure System for Large Discount Stores,' implemented in 2012 to protect traditional markets, has surpassed 10 years, but its effectiveness has been found to be minimal.

The Korea Economic Research Institute (KERI), a subsidiary of the Korea Economic Association, announced on the 15th that an analysis of 1.3 million consumer purchase data points revealed that consumption at traditional markets did not increase even on days when large discount stores were closed. This means that consumers did not necessarily turn to traditional markets just because large discount stores were closed.

KERI analyzed grocery purchase data from large discount stores, traditional markets, online malls, and supermarkets using consumer panel data from the Rural Development Administration, based on the year 2022 before the mandatory weekday closure was introduced. The results were published in the report titled "Regulations on Large Discount Store Operations and the Crisis of Offline Distribution: Analysis of Overseas Cases and Consumer Patterns Using Big Data."

According to the report, the average grocery purchase amount at traditional markets on Sundays when large discount stores were mandatorily closed in 2022 was 6.1 million KRW, which was actually less than the 6.3 million KRW spent on Sundays when large discount stores were open. Researcher Minhee Yoo of KERI stated, "Consumers who prefer large discount stores tend to either shop online or purchase in advance on other days rather than turning to traditional markets when large discount stores are closed," adding, "Large discount stores and traditional markets can be seen as complementary distribution channels rather than competitors."

Comparing the average grocery purchase amounts on mandatory closure days of large discount stores between 2015 and 2022, purchases at traditional markets decreased by 55% (from 13.7 million KRW to 6.1 million KRW), while online mall purchases increased more than 20-fold (from 3.5 million KRW to 81.7 million KRW). This suggests that the majority of consumers who used large discount stores have shifted to online malls. Grocery purchase amounts in offline distribution channels (large discount stores, traditional markets, supermarkets) also decreased in 2022 compared to 2015.

As consumer purchasing patterns shifted from offline to online, the sales index of large discount stores also declined. It was 114.2 in the first quarter of 2011 but dropped to 92.0 in the fourth quarter of last year. In contrast, the internet shopping sales index surged from 21.8 to 135.3 during the same period. Internet shopping sales also surpassed those of large discount stores starting in 2020. Consequently, the sales and operating profits of the three major large discount store chains have continuously decreased, and over the past 10 years, 52 large discount stores and 202 corporate supermarkets (SSMs) have closed, confirming a deepening recession in the offline distribution sector overall. The mandatory closure of large discount stores has ironically increased online consumption and led large discount stores down a path of decline. Researcher Yoo argued, "As internet shopping replaces large discount stores and the center of consumption shifts online, regulations on large discount stores may accelerate the contraction of the offline distribution market by pushing more consumers toward online shopping."

The report also pointed out that the mandatory closure regulation for large discount stores is a rare and unique case internationally. Some countries such as Germany, the United Kingdom, Canada, and France have restricted Sunday operating hours to protect religious activities. However, even where regulations exist, there is a trend toward relaxation in response to changes in the consumption environment. Japan implemented operating hour regulations for large discount stores in 1973 to protect small retailers but abolished them in 2000 due to consumer inconvenience and a downturn in the distribution industry. Instead, KERI advised that policies should be designed to substantially enhance the competitiveness of traditional markets through the adoption of digital technologies, application of modern management techniques, and organic connections with local communities. Researcher Yoo emphasized, "If the mandatory closure policy's effect is minimal, it should be boldly improved or alternatives sought," adding, "It is a critical time to build a distribution ecosystem where online platforms, large discount stores, and traditional markets can grow together."