Korea's traditional markets have been under constant pressure in the last several years amid the rising presence of large discount, or warehouse, retailers and bulked-up supermarkets. In 2012, sales at traditional markets totaled 21.1 trillion won, a 29 percent decline from 29.8 trillion won in 2006.
Much of the attention on the diminishing competitiveness of traditional markets revolves around the transformation of retail distribution in Korea and shifts in consumer habits. But the actions of small-scale merchants who populate the markets also warrant attention.
In a survey of traditional market customers, 65.1 percent of the respondents said they would not revisit a traditional market or recommend one because of issues related to the merchants themselves. Among their complaints were a lack of product variety and quality, prices and unfriendly service. Besides improving the infrastructure, efforts are needed to encourage merchants to innovate.
The Samsung Economic Research Institute separated innovation at traditional markets into three categories — marketing, product and operations ― by applying the OECD Oslo manual, an international guidebook on classifying innovation in industry. It was found that successful small-scale merchants at traditional markets shared a deliberate approach in applying various innovative strategies and efforts to differentiate themselves from competitors. Profiles of several merchants are as follows.
Haseobang Gwangcheon Togul Saeujeot is a store in Hongseong County, South Chungcheong Province, that specializes in jeotgal, a traditional Korean salt-fermented seafood that is commonly used as a sauce or condiment.
With its main focus being saeujeot, or salt-fermented shrimp, Haseobang selects the best ingredients to ensure the finest quality, and uses its own proprietary methods. Among them is rapid ripening, in which saeujeot is ripened faster than at other stores to reduce the odor of the shrimp and provide superior freshness. Haseobang has received favorable reviews for trying new marketing methods to target young people. Haseobang owner Ha Chang-soo previously worked at a design firm and his wife has experience in information technology. By combining their knowledge and analyzing preferences for salinity and taste in terms of age, they produced small packages, designs and a customer database to attract younger consumers, who are less fond of salty food and not familiar with jeotgal.
Golden Shoe, part of the Hwaji Central Market in Nonsan City, South Chungcheong Province, has been in business for more than 30 years and has withstood the challenge of a large discount shoe store, which set up nearby. Knowing that large stores do not hold small batches of a shoe model, Golden Shoe found a niche in having a smaller inventory that could be refreshed faster. He also checked the offerings and prices at the discount stores to minimize competition on those fronts and visited shoe business veterans to learn about product display and communicating with customers.
Kim Jeong-ae went from selling handmade wooden chopsticks from a street cart to a nationwide vendor. Korea's wooden chopsticks are largely made from cheap material imported from China so Kim adopted a high-end strategy. She enlisted her husband, an expert craftsman in mother-of-pearl inlaid lacquer ware, to perfect a technique for making handmade wooden chopsticks that are environmentally friendly and bacteria resistant. Kim also pursued an aggressive promotional campaign, including sponsorship of TV dramas, and her chopsticks began appearing in department stores nationwide. Kim's store, Aihasi, is in Busan's Kukje Market.
Ko Gyeong-hee began his career in 1974 as an employee of a seafood store. Now, nearly 40 years later, he is the head of Jeju Seafood in Jeju's Dongmun Fish Market and brandishes a sterling reputation for quality control. "I might fib to my wife, but I would never lie about quality," he once quipped. Ko takes great pains to make sure imported products are not labeled domestic and food is not sold beyond its expiration date. As freshness is paramount with seafood products, Ko promises to deliver within two hours anywhere on Jeju Island. Even in inland areas, where delivery costs are higher, Ko promises delivery within the day. He never makes promises he cannot keep, placing high priority on maintaining trust, and is well respected within the market for his studious bookkeeping.
Success keyword for merchants: S.T.R.O.N.G
The acronym to describe these types of merchants is S.T.R.O.N.G. They share a Spirit, maintaining an intense desire and sincerity in treating their customers the right way, as merchants, as well as a Target for improvement that is clear and precise.
The other keywords are as follows. First, the keyword for marketing innovation is Relationships, thinking from a customer's perspective, which can lead to ways to satisfy needs and desires such as in better packaging and design, IT use and bolder pricing strategies.
Only involve products that are exclusive. Successful merchants create unique products though craftsmanship, the timely release of products to meet changing consumer trends and the development of proprietary products that cannot be imitated. The keywords for operational innovation is Networking, which has merchants uniting to strengthen the attractiveness of a traditional market to shoppers, and Grounded, which keeps merchants true to the basic values and customs of a traditional market. Successful merchants spread their knowledge on efficient store operation to induce changes while adhering to thorough quality management. It is important to create a social infrastructure so success is widely shared. Merchants should make comprehensive consideration of their capability and surrounding conditions, think deeply about their business values and promote proper innovation strategies.
To this end, they could benchmark successful cases and link them to their own business, while actively cooperating with neighboring stores or merchants' associations. The government could establish innovation support programs, and find and spread successful cases. Relevant government agencies or institutions also need to lend more educational and IT support to merchants.
This article was provided by the Samsung Economic Research Institute.