"Department Stores Take 23.7% Commission... Burden on Tenant SMEs Remains Heavy"

Korea Federation of SMEs Releases Survey Results

Department stores and large discount stores are charging small and medium-sized enterprises (SMEs) that have set up shop within their premises an average sales commission of over 20%, according to a recent survey. With declining sales and the downsizing of some stores, the burden and damage experienced by these SMEs is spreading.

On December 9, the Korea Federation of SMEs announced the results of its "2025 Survey on Transaction Practices of SMEs Entering Offline Large-Scale Retailers." The survey was conducted from September 22 to October 24, targeting 900 SMEs that have entered offline large-scale retailers.

The most common transaction type for SMEs entering department stores was special contract purchasing, accounting for 67.2%, while direct purchasing was the most common for large discount stores at 76.3%. The average sales commission rate borne by SMEs in special contract purchasing or leasing transactions was 23.7% for department stores and 20.5% for large discount stores.

The sales commission rate at department stores was found to be highest for household goods, miscellaneous items, and apparel. The highest individual responses for department store commission rates were as follows: Shinsegae (38.0%), Lotte (36.0%), Galleria (33.0%), AK (30.0%), and Hyundai (26.0%). For large discount stores, the highest sales commission rate reported was 25.0% for Emart, Hanaro Mart, Homeplus, and Lotte Mart alike. The lowest sales commission rate reported for both department stores and large discount stores was 10.0% at Lotte.

For direct purchasing transactions, the average margin rate for large-scale retailers was 23.9% for department stores and 20.4% for large discount stores. The margin for direct purchasing at large discount stores was highest for household goods, miscellaneous items, food, and health products. The highest individual responses for margin rates at large discount stores were: Homeplus (40.0%), Lotte Mart (35.0%), and Emart and Hanaro Mart (25.0%).

Among department store tenants, the highest reported margin rates were: Hyundai and Galleria (30.0%), AK (26.0%), and Lotte and Shinsegae (25.0%). The lowest reported margin rates were 10.0% at Shinsegae and Hyundai for department stores, and 14.0% at Hanaro Mart and Homeplus for large discount stores.

When asked about the burden of transaction costs in 2024, taking into account sales fluctuations, 73.0% of SMEs in department stores and 66.0% in large discount stores responded that there was no change compared to the previous year. However, 11.2% of department store tenants and 17.3% of large discount store tenants said their burden had increased compared to the previous year.

Among SMEs in large discount stores, 40.3% responded that transaction conditions had improved. However, 37.5% reported that their sales through large discount stores had decreased compared to the previous year. Additionally, 29.5% of large discount store tenants believed that the growth of online distribution had impacted the decline in store sales.

Some large discount stores have closed branches and reduced their distribution networks, with 7.8% of SMEs reporting that they had suffered damages as a result. Among the affected SMEs (31 companies), the main difficulties cited were the burden of securing new sales channels due to a reduction in clients and delays in transaction schedules.

Choo Moon-gap, Head of Economic Policy at the Korea Federation of SMEs, stated, "With the growing influence of the online distribution market, sales at offline large-scale retailers are declining, and some retailers are even closing or reducing their distribution networks, which is spreading the damage among tenant SMEs. As offline retailers seek to enhance competitiveness by downsizing stores and expanding online sales, it is necessary to ensure proper management and support to minimize the damage to tenant companies."