[The Editors' Verdict] The Blue Crab War

"Blue Crab Wars" Heat Up as Coupang Joins the Fray
Offline Retailers Struggle to Compete Amid Rapid Growth of E-Commerce Giants
Unfair Regulations Target Only Brick-and-Mortar Supermarkets
Calls Grow to Repeal Outdated Restrictions and Ensu

Last weekend, a "blue crab war" broke out among major fresh food retail channels. This is the annual lowest-price competition among large supermarket chains that occurs every year around this time, when the blue crab fishing ban is lifted. This year, the competition intensified as Coupang, an e-commerce platform, joined the fray. Emart, the leading supermarket chain, sold blue crabs at 760 won per 100g for three days starting on the 22nd, and Coupang matched the price during the same period, escalating the competition.

During this period, Homeplus and Lotte Mart, the second and third largest supermarket chains, sold blue crabs for 790 won and 992 won per 100g, respectively. As someone who had been eagerly awaiting blue crab season, I headed to Coupang. The convenience of being able to order the cheapest blue crab with just a few taps and receive it the next morning was appealing. However, when I opened the Coupang application, I was met with disappointment. There were no blue crabs available for under 1,000 won per 100g. The lowest price I could find was in the 1,300 won range. In the end, my laziness won out over my craving.

During this period, major supermarkets were reportedly so crowded that lines formed all the way to the elevators at the store entrances, according to posts on mom community forums. Like Coupang, these supermarkets also sold only a set quantity per day, and blue crabs were already sold out by the morning, which was some consolation.

Discount products like the lowest-priced blue crab offered by major retailers are so-called "loss leader" items designed to attract customers. Traditionally, offline retailers have used discount events to entice customers to visit their stores. Consumers would go to the store for discounted products and end up filling their carts with "buy one, get one free" and other tempting deals.

However, these days, with next-day and even same-day delivery available, it is common to see shoppers comparing prices on the Coupang app on their smartphones while putting discounted products into their carts at offline stores. Fast delivery and competitive pricing have helped Coupang grow into a retail giant with annual sales in the 40 trillion won range. According to Coupang's most recent audit report, its standalone operating profit last year reached 1.2 trillion won. This is ten times Emart's standalone operating profit of 120 billion won during the same period. Homeplus has been running deficits for years and has entered corporate rehabilitation proceedings this year.

Currently, large supermarkets are subject to mandatory closures on two public holidays per month and are prohibited from operating late at night. While some local governments are lifting these regulations, most regions still enforce them. With a stagnant domestic market due to population decline and low growth, competition is fierce between online and offline channels. Regulations targeting only offline retail stores are unfair.

The Distribution Industry Development Act, which contains these regulations, was amended and passed at a National Assembly plenary session on December 30, 2011, five months before the 19th National Assembly general election. At the time, the ruling Grand National Party (now the People Power Party) led the push to regulate large supermarket chains affiliated with conglomerates as a populist policy to appease public anger at the end of the Lee Myungbak administration. The rationale was that large corporate retail stores were causing the demise of traditional markets and neighborhood businesses.

How have things changed more than a decade later? Earlier this year, when some members of the Democratic Party of Korea pushed for a bill mandating large supermarkets to close on public holidays, even party members objected, asking, "Where will residents of new towns without traditional markets shop?" Times have clearly changed. Nevertheless, no bill has been introduced to lift these regulations. Populist regulations aimed at winning votes are rushed through before elections, but once enacted, they are rarely repealed. Early last year, former President Yoon Sukyeol promised to ease supermarket regulations at the government level, but even this has now been labeled a "policy of an insurrection suspect" due to the December 3 Martial Law Declaration, making further calls for deregulation even less likely.

The Distribution Industry Development Act was created to ensure fair competition between large corporations and small merchants. "Fair competition" means that market participants compete under just and equal conditions.