Discount chains lose ground under outdated regulations

The headquarters of Homeplus is seen closed in Seoul, July 3. Yonhap

The government's regulations on discount chain stores are facing growing criticism, with calls for the rules to be abolished or eased to help the offline retail sector survive intensifying competition from the fast-growing e-commerce industry.

Introduced in 2012 to protect traditional markets and small businesses, the regulations generally require large discount stores to close on the second and fourth Sunday of each month and prohibit them from operating or making deliveries between midnight and 8 a.m.

The initiative to ease or abolish the rules has gained momentum in the National Assembly and among market researchers, who argue the regulations are outdated and no longer reflect a retail market increasingly dominated by e-commerce.

The biggest criticism is that the regulations were crafted at a time when e-commerce had yet to emerge as a major retail force. Instead, discount chain stores dominated the market. Emart, Lotte Mart and Homeplus, the country's three largest discount store chains, generated a combined 37.2 trillion won ($24.4 billion) in sales in 2012 while operating a record 501 stores, surpassing department stores, traditional markets and convenience stores in sales, according to the Ministry of Data and Statistics. Their combined sales peaked at 39.5 trillion won in 2014.

Following the introduction of the regulations, the combined sales of the country's discount store chains fell to 31.4 trillion won in 2016, 28.2 trillion won in 2018 and 27.4 trillion won in 2019, the lowest level since 2007. Homeplus, meanwhile, is on the brink of bankruptcy unless it secures 200 billion won within the next two weeks to maintain its court-led rehabilitation process.

Members of the Homeplus General Trade Union rally in front of the office of Meritz Financial Group, the largest creditor of Homeplus, at the IFC building in Seoul, Tuesday, demanding that it inject 200 billion won ($131 million) into Homeplus so the chain company can avoid bankruptcy. Yonhap

While discount chain stores have been constrained by the regulations, e-commerce — not traditional markets — has emerged as the biggest beneficiary, with annual sales soaring from 3.8 trillion won in 2006 to 272 trillion won last year.

Now, with nearly 60 percent of all retail sales taking place online, the regulations targeting discount chain stores to protect traditional markets are increasingly seen as outdated. Small business owners, who were expected to benefit from the restrictions, say they have seen little spillover effect. Instead, they argue that as discount chain stores lost customers because of the regulations, neighboring small businesses also suffered from the decline in foot traffic.

A recent survey of 2,000 people by the Korea Distribution Association, a nongovernmental research agency, showed 59.5 percent supported easing or abolishing the regulations against 30.4 percent who favored keeping them in place.

More than 65 percent of the respondents also said the superstores’ early morning delivery should be allowed, as major e-commerce platforms such as Coupang, Kurly, Gmarket and Naver already do. Supporters of deregulation argue the restrictions prevent the stores from competing with online retailers on a level playing field.

In February, Rep. Kim Dong-ah of the ruling Democratic Party of Korea proposed a revision to the Distribution Industry Development Act at the National Assembly’s Trade, Industry, Energy, SMEs and Startups Committee. He proposed that discount chain stores be allowed to offer early morning delivery to provide them with the opportunity for fair competition with e-commerce firms.

Rep. Kim Sung-won of the main opposition People Power Party last month proposed another revision to the same act at the same committee, calling for the abolition of the mandatory business closing for offline stores.

Both proposals are currently pending at the committee’s bill review subcommittee before being sent to the National Assembly’s Legislation and Judiciary Committee. They reflect the fact that the country’s two largest parties have shown a common interest in fixing the existing policy. But the passage of the revised bill now faces opposition from small businesses who fear chain stores will again increase their market presence and threaten their businesses.

A Coupang delivery truck is parked at a Coupang logistics center in downtown Seoul, Dec. 30, 2025. Korea Times photo by Lim Ji-hoon

Researchers from the Korea Development Institute (KDI) also published reports arguing the regulations should be fixed for fairer market competition between chain stores and e-commerce. KDI researcher Lee Jin-guk said the mandatory business closure on Sunday is best replaced by voluntary policies decided by local governments.

“The optimal alternative in the long-term would be bestowing freedom to the local authorities to decide whether to make the superstores in their jurisdictions operate without any mandatory closing or close on any day they choose. Under the current laws, local authorities are entitled to choose a day for the mandatory closing,” Lee said.

He said his KDI Focus report published in May showed that even changing the mandatory closing day from Sunday to a weekday improved sales. Being open for full-weekend shopping proved critical for the stores.

“The governments in Daegu and Busan have already changed the mandatory closing day from Sunday to Wednesday, seeing a growth in sales of local superstores. All in all, the best solution would be entitling the local governments full responsibility, from abolishing mandatory closing to enforcing it on a selective day,” he added.

Lee Gong, a KDI researcher who published another KDI Focus report published last month and defended the superstores’ business rights against e-commerce, said the early morning delivery ban for the stores should be abolished for fairer market competition.

“Even if the regulations would be entirely dropped right now, it would be difficult for the superstores to gain back competitiveness against e-commerce platforms, which have built up significant market shares by now,” he said. “So deregulating the superstores one step at a time at this point is meaningless. The least we can do is allow them early morning delivery.”