(Yonhap Feature) Expansion by retail giants threatens mom-and-pop grocers

By Park Bo-ram
SEOUL, July 24 (Yonhap) -- South Korea's growth-hungry retail giants are racing
headlong into a turf war with mom-and-pop grocers as they set up more small chain
stores in residential neighborhoods, analysts said Friday.

In a bid to secure more sources of revenue, these Wal-Mart-like behemoths are
moving aggressively to boost their secondary grocery brands. But their foray has
sparked outrage among small business owners, who charge the conglomerates with
stamping out retail diversity.
"It's worrying how fast the retail chains are replacing corner stores," said Kim
Kyoung-bae, a representative with the Korea Supermarket Alliance.
"Retail conglomerates are turning a deaf ear to our demand for shared and
balanced development as they pursue ruthless, capitalistic growth," Kim said.
"They have left no room for mom-and-pop stores to coexist with them."
Faced with hardening protests and a government intervention, however, major
retail outlets are now being forced to curb their growth.
Samsung Tesco Co., operator of the Homeplus discount chain, canceled its
scheduled opening of a Homeplus Express grocery outlet in the western port city
of Incheon this month due to protests. It now faces challenges in carrying out a
plan to open nearly 200 of the stores nationwide by the end of the year.
Plans by discount retail industry leader Shinsegae Co. to open 40 E-Mart Everyday
stores, the grocery component to its big box E-Mart chain, may also be suspended
or retooled.
Tensions are escalating as small store owners find themselves helpless to compete
with market-savvy retail chains stocked with both well-known brand names and
cheaper store-brand products.
"The chain stores are inflicting damage not only on supermarkets, but also on
bakeries, drugstores, butcher shops and nearby vegetable sellers, who are
reporting drops of around 40 percent their sales," said Kim, whose group
represents some 25,000 small business owners.
Offering unlimited credit card acceptance and bargain deals made possible by
their deep pockets, chain stores attract consumers seeking brand-name foods and
clean, well-lit facilities.
The pushback by small shop owners has led the government to consider installing
new regulations on retail conglomerate growth. But the administration has one
hand tied behind its back because imposing restrictions on store hours or items
on sale -- as demanded by mom-and-pop stores -- risks violating World Trade
Organization rules.
Analysts say saturation in the big box discount market prompted retail giants to
seek new revenue sources in smaller grocery stores that are closer to the
country's densely populated residential areas.
Fierce competition to gain a foothold in the market lifted the number of large
discount stores to almost 400 in 2009, compared with a single store in 1993.
"Retailers are no longer able to find store sites that are large and densely
populated enough to secure the number of shoppers needed to meet their profit
models," said Han Sang-hwa, an analyst at Tong Yang Securities.
Recession-driven shifts in shopping patterns have also helped garner interest in
the small-volume retail market.
"Due to the ongoing economic downturn, consumers are opting for short-distance
shopping and buying small-packaged goods, and shifting away from bulk purchases
at distant outlets," said Han Kook-hee, an analyst at Eugene Investment &
Securities Co.
Still, experts doubt that small groceries will prove profitable enough for chain
operators.
"The market for smaller stores may not prove lucrative, as supermarket chains may
rake in only 3-4 percent in operating profits, compared with around 8 percent for
the big chain sector," according to Han.
"Nevertheless, retail giants are jumping into a bloody competition in this
economy-of-scale-defined market, where the holder of the most stores reaps the
highest margin," Han said. "They have to open more stores, or perish."
pbr@yna.co.kr
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