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Has Korea’s E-Mart Policy Hurt More Than Helped?

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Is E-Mart Killing The Economy?

Korea’s traditional grocery stores are struggling. They have been struggling for decades, since the first E-Mart “super-supermarket” opened in 1993. According to a recent article by Korea Exposé, between 2000 and 2011, for every one store like E-Mart opening, 22 smaller mom-and-pops have gone out of business. Since people’s needs for groceries haven’t waned, it’s logical to suggest that these big box centers have sucked the market from the smaller guys.

E-Mart, Lotte Mart, and Homeplus are run by Korea’s humongous family run conglomerates, chaebols. They have the deep pockets to sell items at slim margins and even at a loss in order to unfairly secure their markets. I’ve heard stories on the inside how E-Mart is one of the most egregious practitioners of squeezing its suppliers to the point that they hardly make any profit off items they sell in its stores.

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Last week at Seoul Food 2017, I was talking to a vendor who supplies mostly Costco. He said that E-Mart reps recently stopped by and wanted to set up distribution for some of his products in their stores at a much lower rate than Costco would have. The vendor politely refused, and the reps acted like the vendor was crazy for turning down this golden opportunity. I should note that they weren’t open for negotiation either.

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The Solution…

One of the solutions some officials cooked up a few years ago was to close all big box supercenters two days a month. On paper, it made sense. If E-Mart was closed, then shoppers would have to get their vegetables at the local small market instead.

Yet that’s not really how it’s turned out.

Small mom-and-pops are still going out of business. I see it all the time. The big boxes have continued to expand.

I’ll throw in what I’ve witnessed myself. I know it’s anecdotal, but this is real.

Big Boxes Attract Customers More Through Variety Than Discounts

One of the early controversies of the store closing law was that it included Costco. Even though Costco is known as a discount supercenter, it doesn’t sell products that directly compete with small biz grocery stores. People don’t go to Costco for gochujang and garlic. They go there for exotic imported food, liquor, and vitamins that they can’t get anywhere else. If a consumer wants to buy a block of cheddar cheese, and Costco is closed, there isn’t an alternative. The mom-and-pops don’t sell blocks of cheddar. Or Italian meats. Or Omega-3 tablets.

If Costco is closed that day, then the consumer is just going to wait until it re-opens.

There are other items that are more common in Korean households that smaller grocery stores don’t supply. Things you don’t even think about, like cat litter. Thank goodness we had a Daiso selling cheap cat litter on a Homeplus-is-closed day when our daughter decided to be a cat and peed in the litter box.

The Law Hurts Other Small Businesses

In its efforts to protect small grocery stores, this law has hurt small businesses that rely on the larger retailers. Restaurants, in particular, rely on Costco and other larger retailers for some of their ingredients. When I started the BBQ pub last year, I had no contacts for suppliers, and it wasn’t as if they were banging on my door. (Well, an import beer distributor did.) A lot of the ingredients we needed for the type of food we served mostly existed at Costco, and it was closer to our restaurant than the other places. There was an E-Mart across the street as well.

There were times when I was prepping in the kitchen and discovered we were out of a crucial ingredient, or we needed some type of kitchen supply. I’d run across the street to E-Mart to get it, and it was closed. There were no other stores close by that sold what we needed to keep the restaurant running. We just had to take it off the menu that evening.

And lose sales.

Closing a source of unique crucial supplies for other small businesses is not only ham handed. It shows favoritism for one type of small business over another. More restaurants close each year in Korea than grocery stores, but there are no laws protecting them from unfair practices by large corporations.

And what of the suppliers for the big boxes? I know a few of them, and they’re not swimming in cash. They’re already stressed from the narrow margins E-Mart and Hyundai give. It compounds their struggles when they can’t sell their products because of mandatory store closings. I’m not just talking about boutique importers. This includes makgeolli brewers, mandu makers, and seafood suppliers. There is no efficient way for them to also get into the smaller grocery stores. The shelves are smaller, and the distribution network is highly inefficient. (Which is a whole other post.)

Large Supermarkets Aren’t Always Cheaper

At the pub, stores like E-Mart were last resorts. I preferred getting my vegetables and dry goods at my local farmers’ co-op and the small grocery stores near my house in Gimpo. The quality was better, and the prices were competitive, if not lower. If I’m out shopping, the mantra I hear from my wife is, “Don’t buy vegetables from Homeplus.”

That’s because their produce is awful and overpriced. Milk is the only common item we buy at Homeplus over the local stores because of price. But even that is changing. We only go to Homeplus for items not at the other stores, like oatmeal, wine, and imported goods. I personally avoid going to Homeplus because it’s more inconvenient. The parking at big boxes is hell. And then you have to go through a series of conveyor belt escalators to get to the food section. It takes too much time compared to the local markets.

It Hurts Small Communities

We currently live in a small neighborhood in Gimpo. We have lots of small grocery stores and one Homeplus. Yet, since we’re a small neighborhood, the building that houses the Homeplus also houses clothing stores, hair salons, a few restaurants, and the neighborhood’s only movie theater. When Homeplus is forced to close, all the other businesses have to shut their doors too.

Last December, my daughter and I got all ready to go see the new Star Wars movie. She was so excited. But the movie theater was closed when we got there because the adjoining supermarket was required to shut down. We eventually found a theater showing the movie in another neighborhood, but seriously. In small communities, closing down the local big box also closes down a lot of other small businesses that the community relies on.

One could also make the case that an E-Mart employs more people than all the small grocery stores in a community combined. But I wouldn’t lean too heavily on that argument. I’m not a big fan of how chaebols treat their employees.

Anti-Consumer, Not Anti-Chaebol

The law as it currently stands is more anti-consumer than it is anti-big-business. There have to be better ways to reign in chaebol power than to hurt other small businesses, consumers, and small communities. According to the Korea Exposé article, the new Moon Jae-in administration (whom I generally support) may actually INCREASE the number of days the big boxes close. This will only hurt the public more than it will help small grocery stores.

How about going in, investigating, and finding a solution to the chaebol choking their suppliers? How about making distribution networks more efficient and less corrupt?

That’s going deeper into the root of the problem. Closing E-Mart a few times a month is just treating the symptom.

Photo credit: Wikimedia Commons (cc)

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