Discount stores reach saturation point

By Jhoo Dong-chan

E-mart said it won’t open new branches in the country this year, the first time Shinsegae Group’s discount store unit has decided to not expand its local sales network since it started business in 1993.

The decision is believed to symbolize saturation of the discount chain market, which once led the nation’s retail industry, but E-mart said it was just a “coincidence” and it will open more stores in the future.

An E-mart official said Sunday: “E-mart has continuously expanded its chain since it opened its first store 24 years ago in Chang-dong, northern Seoul. It decided to open three more Traders branches in the country this year. E-mart will open its new branches here next year, but just not for this year. There is no specific reason behind the decision because our sales are still strong and solid.”

Traders is Shinsegae Group’s warehouse-style discount wholesaler and retailer emulating U.S. giant Costco.

Industry insiders said, however, that market saturation and the increasing online shopping trend accompanied with tightened government regulations on large retailers are the factors behind the decision.

The Distribution Industry Development Act, which was introduced in 2010 to promote coexistence with traditional markets and small-size merchants, has since been revised several times to regulate large-size retailers’ massive expansion.

Large-size retailers, which enjoyed double-digit growth in sales performance every year in the mid 2000s, has faced a slowdown in growth since 2012.

Likewise, E-mart peaked its branch expansion by opening 14 new stores in 2001, but opened only a couple of branches annually over the last three years. Now, it is currently operating a total of 147 across the country.

Home plus, the nation’s second-largest retailer currently with 113 branches, is also not expected to open a new store in Korea this year.

“Home plus may be able to open one new branch by the end of the year, but it could be delayed until next year if the schedule is slowed down,” a Home plus official said.

Another retailer giant Lotte Mart is expected to open two more branches in Korea this year.

The size of Korea’s large-size retail market was only about 10.6 trillion won ($90.7 billion) in 2000, but expanded to 19.2 trillion won to surpass the 17.2 trillion won of the nation’s department store market in 2003. Its market size reached 30 trillion won in 2008.

The market has then faced a slowdown since the government introduced the strong regulatory measure, failing to surpass 40 trillion won in size between 2013 and 2015.

During the period, the nation’s large-size retail market has grown about 0.3 to 1.6 percent.