Early-morning delivery for large discount stores to rein in Coupang...the big winner from this first policy 'about-face' in 13 years [Weekend Money]

As regulations that only helped Coupang are lifted
Emart also gets "dawn delivery"
CJ Logistics is smiling in the background

The more exhausting parenting and working life became, the more valuable Coupang was. As long as it was an early-morning delivery order placed the night before, you could find your items at your doorstep the next morning. This was a service that Emart or Homeplus could not offer. Large discount stores are legally prohibited from operating between midnight and 10 a.m.

Now, there are signs that this regulation will be lifted for the first time in 13 years. The government and the ruling party have stepped up, saying they will revise the law to allow large discount stores to offer early-morning delivery as well. There is one player that is happiest about this news: CJ Logistics, the number-one parcel delivery company.

CJ Logistics delivery vehicle

Why large discount stores were banned from selling at dawn

In 2013, the government restricted the operating hours of large discount stores in an effort to revive traditional markets. They were required to close from midnight to 10 a.m., and they also had to shut down for two days every month without exception. There was also the stated rationale of guaranteeing rest time for store employees.

The problem was that this regulation applied only to offline stores. Online shopping malls were free to operate 24 hours a day without any sanctions. While large discount stores were effectively tied down, Coupang swallowed up the market with its early-morning delivery service. In 2024, Coupang’s annual revenue of 41.3 trillion won surpassed the combined sales of all domestic large discount stores, which stood at 37.1 trillion won.

Then did traditional markets revive? Some research results suggest that, on mandatory closure days, sales at traditional markets actually decreased. On days when the large discount stores were closed, consumers went online instead of going to the markets.

A Coupang logistics center in Seoul. Yonhap News

Market upheaval in early-morning delivery triggered by the 'Coupang scandal'

Early-Morning Delivery Map

The 'Coupang scandal' that broke out last year changed the mood. There was a massive personal data leak, refusal to appear at a National Assembly hearing, and even suspicions of lobbying through the U.S. government. Among consumers, a 'Talpang' (leaving Coupang) movement emerged, but the problem was that there were no clear alternatives.

The political establishment realized this belatedly.

'To rein in Coupang, we must first remove the shackles on large discount stores.'

On February 4, the Democratic Party of Korea, the government, and the presidential office held a working-level consultative meeting. They discussed revising the Distribution Industry Development Act in a direction that would ease restrictions on the operating hours of large discount stores. If the law is amended as reported, Emart, Lotte Mart, and Homeplus will all be able to offer early-morning delivery.

'Biggest beneficiary' CJ Logistics

If large discount stores start early-morning delivery, who will transport the goods? CJ Logistics. The company already handles all early-morning deliveries for SSG.com, the online mall affiliated with the Shinsegae Group. From the perspective of the large discount stores, it is far more efficient to use CJ Logistics, which already has nationwide infrastructure, than to build their own logistics networks from scratch.

On February 6, KB Securities raised its target price for CJ Logistics to 140,000 won. This implies a potential rise of 28% compared with the current share price of 109,400 won. The securities firm pointed to two main benefits.

Delivery vehicles are parked at a CJ Logistics terminal in Seoul. Yonhap News

First, an increase in early-morning delivery volume. The core of early-morning delivery is fresh food, and Emart is strong in fresh food. If the regulation is lifted, Emart is expected to enter the early-morning delivery market in earnest, and that volume will flow to CJ Logistics. CJ Logistics’ current annual revenue from early-morning delivery is around 160 billion won, and this could increase significantly.

Second, the effect of distributing delivery times. At present, parcel volumes are concentrated during daytime hours. If early-morning deliveries increase, volumes will be spread out over 24 hours. In other words, the company will be able to transport more goods without adding new terminals or vehicles. CJ Logistics has already introduced seven-day-a-week delivery starting last year, and Sunday delivery volume has increased by as much as 67%. There is room for this kind of know-how to come into play.

Can they topple Coupang’s stronghold?

There is, of course, a skeptical view. Over the past 10 years, Coupang has invested more than 9 trillion won to build out a nationwide logistics network. It is overly optimistic to expect that this gap can be narrowed overnight just by changing a single law. Moreover, the mandatory closure-day regulation will remain in place. This means that early-morning delivery will still not be allowed on days when the large discount stores are closed.

Even so, the large discount store industry seems to see this as an opportunity to shake up a game that has been flowing one-sidedly for years. Some 1,800 large discount stores and corporate supermarkets scattered across the country can all become potential logistics hubs. In particular, in regional areas where Coupang’s logistics centers are lacking, early-morning delivery by large discount stores could emerge as a 'real alternative to Coupang'.

From 'regulation' three months ago to 'easing' now... the government’s contradiction

On Nov. 19 of last year, at the National Assembly press center, the bereaved family of a Coupang early-morning delivery courier who died in Jeju held a press conference, demanding an apology from Coupang and measures to prevent a recurrence. Yonhap News Agency

The latest move to ease regulations on large discount stores also leaves a somewhat bitter aftertaste.

As recently as three months ago, the government had taken the exact opposite stance on easing regulations on large discount stores, especially regarding early-morning delivery. In November of last year, Minister of Employment and Labor Kim Younghoon said, "Early-morning delivery is so harmful that the International Agency for Research on Cancer has classified it as a Group 2 carcinogen," adding, "We need a public debate on how to regulate late-night work." This came right after a fact-finding survey of 1,021 early-morning delivery workers found that their rate of depression was three times that of ordinary workers, and their rate of having had suicidal thoughts was 2.4 times higher.

That same government is now saying it will allow early-morning delivery by large discount stores. The underlying motive is to keep Coupang in check. Where did the earlier justification go? It is clearly not the case that early-morning delivery workers at Coupang must be regulated if they get sick, while early-morning delivery workers at Emart are somehow fine if they get sick.

Large discount stores have been competing on a tilted playing field for 13 years. It remains to be seen whether they will now be able to engage in even slightly more level competition, and how much of the resulting upside CJ Logistics will be able to capture, as securities firms predict. What is certain is that, even at that very moment, countless delivery workers are still traversing the dawn.