Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Ruling party's move to restrict operations of large offline retailers faces criticism
A noticeboard advertises up to a 50 percent discount on groceries and daily necessities at a Seoul branch store of Lotte Mart, Friday. Yonhap
By Yi Whan-woo
The ruling Democratic Party of Korea (DPK) is raising concerns over its push to revive operational restrictions on large offline retailers in the name of protecting small retailers, as experts say the measure will only aggravate an already sluggish domestic demand.
The DPK said the controversial move is in line with President Lee Jae-myung’s attempt to spur domestic demand, a key driver of Korea’s economic growth, through expansionary fiscal policy and financial support for self-employed individuals.
But the experts say that reinstating the mandatory closure rule for discount store chains and supermarkets will hinder consumers from buying goods and services.
The rule was imposed in 2012, requiring discount store chains and supermarkets to shut down every second and fourth Sunday of each month. Such restricted business hours were intended to protect traditional markets and mom-and-pop stores from losing sales.
The regulation, however, did not necessarily induce consumers to turn to smaller retailers, especially amid a spending shift from offline to online.
As a result, the relevant guidelines were implemented flexibly under the previous Yoon Suk Yeol administration, allowing multiple municipal governments to designate less busy weekdays, such as Tuesdays or Wednesdays, as closure day.
Lee did not specifically comment on the disputed rule.
But the DPK proposed a bill to strip the municipal governments of such discretionary authority. The bill also calls for two mandatory closure days per month — on weekends or legal public holidays.
The bill has already passed the National Assembly subcommittee and is expected to be submitted to the plenary session soon.
The DPK additionally proposed a bill adding five more years to restrictions that prevent corporate-owned supermarkets from opening within a 1-kilometer radius of traditional markets.
“This mandatory closure rule turned out not to be effective, and its reinstatement will be a serious mistake,” Inha University economics professor Shin Il-soon said.
Shin Se-don, professor emeritus of economics at Sookmyung Women’s University, also called the regulation “out of date,” saying it “fails to reflect fast-changing shopping trends in the digital era.”
“Even the large offline retailers are losing customers to their online competitors,” the professor said.
He referred to the fact that Lotte Mart and Emart, both conglomerate-owned discount store chain brands, have struggled in sales due to the rise of e-commerce giant Coupang since its founding in 2010.
“Against this backdrop, it will be extremely naive to assume consumers will shop in the traditional markets and small corner stores when the mandatory closure rule fully takes effect again,” Shin said. “Furthermore, the rule will backfire on the government’s efforts to enliven domestic demand and the entire economy.”
Asking not to be named, a researcher at a private think tank said the Lee administration and the DPK are “narrow-sighted” in their approach to boosting domestic demand.
“Thousands of workers are hired by discount store chains and supermarkets, meaning restricting these large retailers will worsen the livelihoods of their employees and make them tighten their belts,” he said.
A stock market analyst deemed that the disputed regulation may take a toll on publicly traded larger retailers and, more broadly, the entire stock market.
Of the large retailers, Emart and Lotte Shopping, the holding company of Lotte Mart, are listed on the benchmark KOSPI.
“The government’s expansionary fiscal policy has been fueling optimism for domestic market-focused firms,” Jung Eui-jung, head of the Korean Stockholders’ Alliance, said. “And the regulation against large retailers may offset positive investment sentiment.”