Homeplus Express is a super supermarket store (SSM), an outlet of a small store chain that has been moving into neighborhoods and clashing with mom-and-pop stores. Legal protection for the traditional stores has been set up but it is expected to face complaints from the European Union (EU).
/ Korea Times file
By Kang Seung-woo
Mom-and-pop stores are expected to face renewed pressures when the free trade agreement (FTA) goes into effect this July following parliamentary approval this week.
The Korean government has come up with several measures geared toward protecting small-sized stores from super supermarkets (SSMs), which has been a hot topic here.
The Ministry of Foreign Affairs and Trade (MOFAT) has claimed that small stores are part of Korea’s unique culture and that they needed to be safeguarded during the FTA talks with the EU.
Yet, the ministry is concerned that Korea might get in trouble in case the EU takes issues with the measures.
``The EU by and large understood our explanations with regard to helping small shops during the FTA negotiations and it did not bring fresh opposition after the agreement received the green light from the Assembly this week. We will wait and see,’’ a MOFAT official said.
Korea has introduced a regulation that bans the establishment of a new SSM within a 500-meter radius of an existing mom-and-pop store. Parties recently agreed to increase the distance to 1 kilometer.
In addition, the Seoul administration is thinking of designating next-door businesses as the realm specific to small companies. In this case, large firms would be forced to leave the industry.
SSMs refer to outlets that are smaller than large discount stores run by retail giants but larger than mom-and-pop shops. They tend to stock a greater range of products with a wider selection.
SSMs have more than doubled in number over the past four years and have been sprouting up more frequently around major urban areas in recent months with big retailers rushing to add more outlets.
The lucrative business encouraged large local and global retailers to jump into the sector, with four retail goliaths ― GS Retail, Lotte Shopping, Tesco and E-Mart ― operating 817 SSMs as of May 3.
Lotte runs the largest number at 287, followed by Tesco with 244, GS with 209 and E-Mart with 77. In terms of annual sales, Lotte tops the list trailed by GS and Lotte. E-Mart is a latecomer to the sector.
In response to the relentless advent of these powerhouses, small business owners have been forced to literally fight it out to prevent their bigger foes from settling in and the clashes at some of Seoul’s major residential and commercial districts have grabbed headlines.
In order to prevent local stores from being driven out of the market, the National Assembly approved a bill in November last year to curb the rising market share of retail giants blamed for snatching business from smaller shop owners and street vendors.
The protective measure came years after owners of small stores took collective action against a chain of large retailers after suffering from business losses due to the presence of the latter in their business districts.
Under the law, an area of 500 square meters near a cluster of small stores is designated as one where the opening of an SSM is restricted, but a recently revised bill expanded the restricted area to 1 square kilometer.
However, retailers have showed jitters over the fallout from the revised bill.
“Tough regulations make it difficult to open SSMs,” said an official of the industry. “Expansion of the restricted area is like the government forbidding us to do SSM business.”