Retail regulations failing to make a big impact
Since June 6, 2012, a local government regulation has required large discount supermarkets like Lotte Mart and E-Mart to be closed every second and fourth Sunday of the month in a bid to boost merchants at traditional markets who have seen dwindling customers.
But more than three years since the regulation was put into place, its effects have been tepid. In interviews with merchants at traditional markets, most said they could not sense a big difference after the regulation, but they did not want the regulation to stop, either.
Many said they hope for more practical measures to stop the decrease in their annual customer numbers. Some complained most traditional markets do not offer parking.
In fact, parking facilities was one of the biggest reasons why customers said they preferred big supermarkets over traditional markets. Customers also cited the wide variety of items they can buy at a supermarket under one roof as another advantage.
On top of that, according to market research firm TNS, big supermarkets typically contain 50,000 stock keeping units, while traditional markets only have 2,000, limiting their supply.
In a TNS survey, when asked what they usually do when big supermarkets are closed, three out of 10 customers said they would postpone shopping until the supermarkets are open again. Seven out of 10 said that they would shop elsewhere, such as at convenience stores or online shopping sites; only 20 percent of those people said they would go to traditional markets instead.
“The regulation on big supermarkets goes against the retail market’s modernization and hinders its gradual development,” said Ahn Seung-ho, a business professor at Soongsil University, during hearings on the regulation in September 2015.
“On top of that, according to market research firm TNS, big supermarkets typically contain 50,000 stock keeping units, while traditional markets only have 2,000, limiting their supply.”
“The cause of small retailers going downhill is not the big supermarkets but the competition and competitiveness problems between similar local business conditions. The policy should be written to elevate the competitiveness of local commerce.”
The regulation has effects not only on big supermarkets but also goods suppliers and supermarket workers. With the stores closed two days a month, goods suppliers suffer a direct economic loss, while supermarket employees, because most of them are non-regular workers, suffer employment instability.
Supporters of small traditional markets, though, insist the regulation is necessary.
“From 2013, the monthly business profits of micro-enterprises have decreased 25.5 percent compared to 2010,” said the head of the survey study department at the Nohwabong Micro-enterprise Promotion Foundation. “This is evidence that the regulation was appropriate.”
Local government and micro-enterprise organizations say the regulation is preventing polarization. They argue that if big market regulations disappear, chances are high that large retailers will monopolize the market, and customers might suffer loss due to price increases.
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