Discount Chains Will Open Small Stores

Beginning of Supermarket War-

“E-mart’s Gwangmyeong store, scheduled to open next January, will be a mini E-mart on a 350-pyong (1,155 m2) site. We are planning to build more mini E-mart stores as large sites that we have secured in the past are all used,” said Shinsegae vice president Chung Yong-jin at a press conference.

Shinsegae’s subsidiary and Korea’s biggest discount store, E-mart, had focused previously on building only large stores on sites with more than 3,000-pyong (9,900 m2).

With regard to mini E-mart stores, Shinsegae said, “They are small stores which are different from supermarkets.” However, those in the distribution market argue that small E-mart stores would, in effect, compete with supermarkets.

Samsung Tesco’s Homeplus, Korea’s second largest discount store chain, announced that the company will open more than 30 “Express” stores, small supermarkets, next year. Homeplus has already formed an Express-taskforce team and is running 31 Express stores across Korea.

Large retail stores which run supermarket chains are not sitting on their hands.

Korea’s largest supermarket chain, GS Retail, plans to construct 20 more “GS Supermarket” stores next year. Lotte Supermarket, a subsidiary of the Lotte group, said the company would open 12 more stores in Korea next year.

Kim’s Club Mart, a subsidiary of the E.Land Group, also plans to open 30 stores in China next year.

Major Causes for Supermarket Boom-

This supermarket boom is attributed to the lack of sites for large retail stores.

“In the past, we opened large retail stores on 3,000~5,000 pyeong (0.99 ~ 1.6 ha) sites with an average population market of 150,000. With intensified opening of stores, we now start small-size stores in hotly competitive market or small cities with a population of 60,000~80,000,” said Shinsegae’s promotion manager Lee Dal-soo.

In addition, strong opposition from the local community and government’s stringent construction regulation are considered to be fueling the trend of building small-size stores.

“The large retail stores’ advance into the small-store market will deal a heavy blow to many supermarket owners, who are already experiencing difficulties,” predicted research analyst Park Jong-ryul of Kyobo Securities.

jsonhng@donga.com cpu@donga.com