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Distribution

Types of Outlet

Department stores
Clothing, Cosmetics, Jewelry, Leather Goods, Food, Restaurants.
Hyundai, Shinsegae, Lotte, Daegu Department, Galleria, Aekyung, IPark
Supermarkets and hypermarkets
Food supermarkets and specialized department stores.
Lotte Mart, Homeplus, Homever, E-Mart,Kim's Club
Convenience stores
Open 24/24.

General food, drink, everyday products.
7-Eleven, Family Mart, GS25, Ministop

Drug Stores
Drugs, Personal hygiene products, Cosmetics, Skin care products.
With Pharm, OptimaCare
 

Evolution of the Retail Sector

Growth and Regulation
Retail sales in South Korea increased by 11.3% in 2021 compared to 2020, due to the sharp increase in online sales following the coronavirus pandemic. According to the Ministry of Commerce, Industry and Energy, combined sales of 25 major offline and online retailers reached KRW 12.19 trillion in February 2022. Traditional retail distribution networks of small family-run stores, stalls in markets and street vendors are being replaced by large discount stores. During the Covid-19 pandemic, offline shops continued to lose ground. Convenience stores were the only winners, while department stores and supermarkets sales dropped. In 2021, as the economy started to recover from the pandemic, department store sales rebounded by 24.1% and sales at convenience store chains climbed 6.8%. Sales in supermarkets fell by 2.3% due to a reduction in the
number of stores, as well as consumer tendencies of avoiding publicly used facilities (South Korea Ministry of Commerce).

As consumers take to the internet to purchase products out of convenience, they are also showing a similar trend in store-based retailing by frequenting convenience stores. In Korea, the high convenience store density suggests that convenience stores are highly accessible and thus have become favoured by consumers looking to quickly pick up some grocery items. Also, convenience stores aggressively developed creative products and services in order to attract frequent consumer visits to the outlets.

As internet retailing becomes one of the strongest retailing channels in South Korea, retail grocery companies have engaged in omni-channel strategies that cater to online shoppers. One such measure is click and collect, whereby consumers can pick up the items they ordered online via pick-up stations in the outlets.

Rapid expansion of large-scale businesses over the years has heightened the competitive pressure in the Korean retail sector. As a result, leading players have actively pursued merger and acquisition (M&A) opportunities to achieve bigger control of the market. Leading retail companies in Korea today have become a "conglomerate" power that operates retail businesses in diverse retail industry segments.
Market share
According USDA Foreign Agricultural Service, Korean retail food sales totaled $103 billion in 2020 (latest data available), accounting for 29% of total retail sales. Grocery supermarkets are the leading food retail channel, followed by hypermarket discount stores, convenience stores, on-line retailers, and department stores. The Korean market is concentrated.
Grocery supermarkets were the main food retail channel, with 39.3 trillion won in food sales in 2020, followed by hypermarkets (17.2 trillion won) and convenience stores (13.6 trillion Won).
Hanaro Mart, Lotte Super, GS Supermarket are among the leading supermarkets if we consider the number of shops. The major hypermarkets are EMART, Home Plus, Lotte Mart and COSTCO. Finally, CU, GS25 and Seven Eleven are the largest convenience stores.
Retail Sector Organisations
Korean Ministry of Trade, Industry and Energy
 

E-commerce

Internet access
Besides having globally the highest average internet connection speed, with an online penetration of about 92.7% South Korea ranks as one of the most connected countries in the world. According to a governmental survey, of the nearly 19 million households in Korea, 99.2% have internet access via optical LAN, xDSL, cable modem, mobile or otherwise. Almost 99% of South Koreans go online at least once a week, spending an average 14.3 hours a week on the internet. More than five million Koreans aged 60 and over are browsing the web, over 50% of the age group, mostly for instant messaging (compared to only 30% of the same age group in the U.S.). South Korea ranks sixth in the world in terms of smartphone usage, with a penetration rate of 77.7%. South Korean official sources estimate the number of smartphone subscribers at 47.4 million, although the figure includes users with more than one account. The search engine market is dominated by local players, with Naver holding 74% of the market share, followed by another local search engine - Daum - at 16%. Google has a 10% market share which, despite being negligible, has been growing quickly over the years.
E-commerce market
South Korea is the third biggest e-commerce market in Asia. Domestic online purchases reached US$ 55.9 billion in 2016, up from US$ 47.6 billion recorded in the previous year. According to a report by Research and Market e-commerce sales already made up nearly 20% of total retail sales due to factors such as a developed Internet infrastructure and having the highest Internet penetration rate in the region. Over half of internet users purchased products online and among them, two-thirds made monthly purchases. The most popular categories of items purchased online were travel, clothes and electronics. The degree of m-commerce use in South Korea is impressive: over half of online retail sales in the country came from mobile last year. Convenience is a major driver of m-commerce, with smartphones ranking both as the most preferred device for online shopping and being used more frequently than computers. Popular shopping apps like 11Street and Coupang both had a seven-digit number of users, but eBay Korea still holds the largest market share of sales. Other popular e-commerce sites include Auction, G-market, Ticket Monster (TMON) and We Make Price. Amazon is also active in the market. Online purchases from foreign retailers have been rapidly increasing because Koreans find less expensive prices on overseas websites even after adding international shipping fees and import duties.  Online purchases from foreign retail sites reached US$ 1.6 billion in 2016, with 65% purchased from U.S. online retailers. Although no official data are available for B2B e-commerce, many players have been looking to expand into B2B e-commerce on consumable sales to small and medium sized companies. G-market was the first one to launch a B2B shopping site called ‘Biz on’ in 2012. Auction also has B2B sites called ‘Biz club’ for food ingredients and ‘Biz plus’ for other consumables. Interpark launched ‘I market Korea’, a platform that integrates B2B and B2C services, while Wemakeprice started ‘Wemakeprice Bizmall’ in 2016. With 5.4 million business owners and 3.5 million small and medium-sized companies, the B2B e-commerce market is expected to be very competitive.
E-commerce sales and customers
The most popular products sourced from domestic online retailers are travel & reservation services (17.4%), home appliances & electronics (11%), clothing (10.6%), home & car accessories (10.2%), cosmetics (7.9%) and computers (6.2%). For the first time, online purchases surpassed hypermarkets’ sales making e-commerce the biggest retail channel in Korea. The average revenue per user is currently estimated at  US$ 1,150. The most active age groups are those between 20-29 and 30-39, with roughly 80% of their members purchasing goods and services online. For groups aged 40-49 and 50-59 the rates are still lower – at 57% and 30% respectively – but they are rising steadily. As competition between e-commerce companies is increasing, quick delivery service is a key to attract more customers. To address this need, Coupang - one of the most popular e-commerce sites in Korea - invested US$ 1.3 billion to build logistics infrastructure for its delivery service called “rocket delivery” in order to be able to distribute goods within a day from the time of order placement. One of the main reasons why people shop online, even though a close by shop could offer an item right away, are discounts and convenience. According to a survey by Korea Internet and Security Agency, PC and mobile shoppers preferred payment method is credit card accounting for 72.4% of PC and 68.1% of mobile shoppers.  Next are debit card and account transfer (both internet and mobile banking service). Payment gateways like Samsung Pay and Naver Pay are attracting more users.
Social media
As of the third quarter 2017, out of a population of 51.25 million, 84% of the population were active social media users (around 43 million). 88.3% of internet users aged above 6 use a messenger service and 99.2% of those use KakaoTalk, a local messenger with more than triple the penetration of Facebook Messenger (29.2%) and Naver’s LINE (13%). Almost 30 million users are on KakaoStory, a social network inspired by KakaoTalk, while 26.6 million use Facebook. Instagram has slightly above 10 million active users monthly. Even though South Korea’s social networks are enjoying widespread popularity with mobile users, interest in Facebook among marketers and consumers is on the rise. A study by DMC Media, for example, found that the country’s social media users aged 19-59 spend more time daily with Facebook than with any other social platform, regardless of device type or operating system. In addition, in South Korea companies use Facebook more than any other social platform.

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Distance selling

Evolution of the Sector
The World Federation of Direct Selling Associations states South Korea's 2016 direct retail sales reached USD 16,862 million in 2016, a 3.8% increase compared to 2015. This makes South Korea the third largest direct selling market behind the U.S. and China, but ahead of Germany and Japan. There are also 6,973,000 independent representatives in the country

According to Euromonitor International, direct selling was dominated by companies such as Amway, Atomy, Amore Pacific, and Nu Skin while other companies removed themselves from the Korean market. Increased regulation is expected due to the growing amount of illegal direct selling companies and incentives for enrollment. Regulations currently stipulate membership fees are limited to KRW 10,000 and benefits derived from benefits should not exceed 35% of sales.

The Korea Direct Selling Association works to standardize industry practices.

 

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Latest Update: November 2022