Urbanization in South Korea

The high population density and the high proportion of urbanized population (83% in 2015) provide a perfect environment for the development of online retail.

Approximately half of South Korea's 51.4 million inhabitants live in the capital city of Seoul or in adjacent satellite cities. The greater Seoul area is therefore the most important metropolitan center.

South Korea's largest cities by population:

1. Seoul – 9.9 million.
2. Busan – 3.45 million.
3. Incheon – 2.89 million.
4. Daegu – 2.47 million.
5. Daejeon – 1.5 million.
6. Gwangju – 1.5 million.
7. Suwon – 1.19 million.
8. Ulsan – 1.17 million.
9. Changwon – 1.06 million.
10. Goyang – 0.99 million.

A comparison of Japan's largest cities by population:

1. Tokyo – 9.56 million.
2. Yokohama – 3.74 million.
3. Osaka – 2.73 million.
4. Nagoya – 2.32 million.
5. Sapporo – 1.97 million.
6. Fukuoka – 1.58 million.
7. Kobe – 1.53 million.
8. Kawasaki – 1.52 million.
9. Kyoto – 1.47 million.
10. Saitama – 1.3 million.

Largest cities and population of Germany compared to China:

• Urbanization in China

In South Korea, the food sector accounts for 23% of total retail sales. South Korean consumers are very sensitive to food safety issues and tend to seek information about them through the media. A shortage of a product is unwelcome, and it takes time to rebuild confidence in its safety. They are particularly drawn to brands, effective marketing, appealing labeling, and attractive packaging.

In 2015, there were 515 hypermarkets in South Korea. Total hypermarket sales in 2016 amounted to €38.5 billion, an 8.8% increase over the previous year. Food products accounted for 51% of sales. Growth in this segment is expected to slow, as market expansion is limited by low population growth. Typical Korean hypermarkets target areas with a minimum population of 150,000. Many projects for new hypermarkets have been halted due to protests from small food retailers and NGOs advocating for the protection of traditional street markets. The Retail Industry Development Act, introduced by the pressured government in January 2013, mandates the closure of large retail stores during evening hours and for at least two full days per month.

In 2016, total supermarket sales amounted to €27.5 billion, 4.3% more than the previous year. Food products accounted for 84.5% of the supermarket segment. Small to medium-sized independently owned supermarkets generated over 70% of segment sales. Large supermarkets owned by dominant retail companies have experienced stagnant growth since 2012, primarily due to government regulations designed to protect traditional street markets.

Department stores generated total sales of €21.8 billion in 2016, a 2.3% increase over the previous year. Food products accounted for 10.1% of sales. However, department stores have experienced stagnant growth in recent years, as the rapid expansion of online retailers has reduced in-store brand consumption. Nevertheless, department stores are likely to remain the leading retail channel for high-quality imported premium products, including food. Consequently, major players in the segment have made substantial investments to allocate additional retail space to luxury brand stores and specialty products. However, the share of food and agricultural products in department store sales is declining.

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The strong growth of online retail has become a major challenge for markets

Changes in consumer lifestyles, coupled with the introduction of new information technologies, have led to rapid growth in online retail over the years. Furthermore, the high population density and the large proportion of urbanized residents (83% in 2015) provide a perfect environment for the development of online retail.

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South Korea's food self-sufficiency rate is approximately 30%, as only 18.1% of its land area is arable. Therefore, the country relies heavily on imports. Of this, only 15.3% is arable land, 2.2% is existing crops, and 0.6% is permanent pasture. An area of ​​12,000 hectares disappears annually due to urban sprawl. South Korea's dependence on imports is significant because local production is insufficient and consumer demand for quality and variety is constantly increasing.

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Leading markets are striving for efficient promotional campaigns (online coupons, membership programs), stronger customer service (in-store service such as pharmacy, laundry and post office) and online shopping with delivery service.

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The following tables provide an overview of the characteristics of the markets in South Korea.

supermarket

The largest supermarket chains in South Korea:

Characteristics of a typical supermarket:

• Sales area between 300 and 2,000 km²
• Parking spaces for 5 to 50 cars
• Employees: 3 to 15 full-time, 1 to 10 part-time
• Item inventory: 4,000 to 30,000
• Daily revenue: 7,700 to 15,400 euros
• Number of daily buyers: 1,000 to 2,000
• Purchase value per consumer: 8 to 16 euros

Hypermarket

The largest hypermarkets in South Korea:

Characteristics of a typical hypermarket:

• Sales area: 10,000 km²
• Parking spaces for 500 to 700 cars
• Employees: 100 to 150 full-time, 5 to 20 part-time
• Item inventory: 4,000 to 30,000
• Daily revenue: 131,000 to 178,000 euros
• Number of daily buyers: 4,000 to 5,000
• Purchase value per consumer: 27 to 40 euros

department store

The largest department stores in South Korea:

Characteristics of a typical department store:

• Sales area: 15,000 to 60,000 km²
• Parking spaces for 700 to 2,000 cars
• Number of daily buyers: 2,000 to 25,000
• Purchase value per consumer: 39 to 77 euros

Known markets in South Korea

7-Eleven
The internationally operating convenience store chain 7-Eleven from Japan is represented in the South Korean market with over 7,000 locations.

Ministop
is a Japanese convenience store (franchise) chain founded in 1980. Unlike other chains of its kind, Ministop offers an integrated kitchen where sandwiches and snacks are prepared. Customers have the option of eating on-site. Ministop opened its first branch in South Korea in 1990. Today, the company operates 1,601 stores nationwide.

Buy The Way
is a South Korean convenience store chain operated under the parent company Lotte 7-Eleven. The chain's first stores opened in 1991 in Shinchon, Seodaemun-gu, Seoul, and Sinchon. By 2005, the company operated over 1,000 stores throughout South Korea.

FamilyMart/CU:
FamilyMart is a Japanese convenience store chain that opened in 1981. In Japan, FamilyMart is the third-largest chain of its kind. In South Korea, it was the largest chain for a long time. To give the company its own identity and a distinctive brand, FamilyMart was renamed "CU" in South Korea. Today, CU operates 7,950 stores throughout South Korea with the motto "Convenience for you."

Lotte Mart
Hypermart – Lotte Mart is part of the South Korean Lotte Group, considered one of South Korea's most important conglomerates. As such, Lotte Mart is a leading retailer with a wide range of products including groceries, clothing, electronics, and other everyday goods. The first store opened in Seoul in 1998. Lotte Mart also has an international presence with 199 stores (as of 2011) in China, Vietnam, and Indonesia.

E-Mart
Hypermart – E-Mart is South Korea's largest discount supermarket chain and was founded in 1993 by the Shinsegae Group. With 150 locations, it achieved a revenue of USD 8.38 billion in 2013, representing a 16% market share in the grocery retail sector. An online store and nine hypermarkets across the country complete its various sales channels within South Korea.

Homeplus
Hypermart – Homeplus is the second-largest South Korean discount retailer after Emart, owned by the Shinsegae Group. Homeplus has 885 stores nationwide with over 25,000 employees.

Costco Wholesale Korea, Ltd.
Hypermart – Costco operates 15 hypermarkets in South Korea, selling groceries among other goods. The subsidiary of the US chain has been operating in South Korea since 1968.

Lotte Super
Hypermart – Lotte Super Co., Ltd. is a major supermarket chain in South Korea. The company was founded in 2000 as a subsidiary of Lotte Shopping Co., Ltd.

GS
Supermarket – GS Supermarket is a leading supermarket chain in South Korea, owned by GS Retail. Other retail chains owned by the company include GS25 (a leading convenience store brand in South Korea), Watsons (health and beauty), Fresh Serve (foodservice), and Parnas Hotel (hotel).

Lotte Department
Store – Lotte Department Store is one of the largest department store chains in South Korea, headquartered in Sogong-dong, Jung-gu, Seoul, South Korea. Founded in 1979, Lotte Department Store is one of the eight business units of the Lotte Shopping Group. Other Lotte retail companies include the discount chain Lotte Mart and the supermarket chain Lotte Super. Lotte Department Store has 31 locations in South Korea with approximately 11,000 employees.

Shinsegae Department
Store – Shinsegae is a South Korean company headquartered in Seoul that operates, among other things, high-end department stores under the name Shinsegae Department Store in South Korea, and lower-priced department stores under the name e-mart in South Korea and China. The name Shinsegae means "New World." Shinsegae has 13 department stores in South Korea.

Hyundai Department
Store – Along with Lotte Department Store and Shinsegae, Hyundai Department Store is one of the three major department store chains in South Korea. The chain has 14 locations and annual sales exceeding USD 340 million. Its parent company is the Hyundai Department Store Group.

Compared to Germany

According to the EHI Retail Institute, sales in the organized food retail sector in Germany amounted to €166.0 billion in 2019, of which €74.5 billion was generated by discount stores alone. The total number of grocery stores in Germany continues to decline. In 2010, there were still 39,288 grocery stores in the country; six years later, only 37,682 remained. In 2019, there were 37,418 retail outlets. Although grocery retailers are experimenting with concepts for smaller stores, the overall market for small-format stores is losing significant ground. Of the 11,193 small grocery stores (up to 400 square meters) in Germany in 2010, only 8,550 remained last year.

While in Japan 91.7% and in South Korea 83% of the total population live in urban areas, in Germany it is less than 50%.

Related to this:

• Closing supply gaps in rural regions
• Ensuring basic services in rural regions

Not the same, but similar sales concepts can help.

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• Local decentralized hubs – logistics centers

 

Source: Federal Ministry of Food and Agriculture

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• Funding provided by the Federal Ministry of Food and Agriculture (BMEL)