Urbanization in South Korea

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

Around half of the 51.4 million South Koreans live in the capital Seoul or in neighboring satellite cities. The greater Seoul area is therefore the most important metropolitan area.

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

Comparing 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 – Urbanization in China

In South Korea, the grocery sector accounts for 23% of total retail sales. South Korean customers are very sensitive to food safety issues and tend to learn about them through media. Food shortages of a product are frowned upon and it takes time to rebuild trust in the safety of that product. They are particularly attracted to brands, good marketing, attractive labeling and packaging.

In 2015, there were 515 hypermarkets in South Korea. The total turnover of hypermarkets in 2016 amounted to 38.5 billion euros, which is 8.8% more than in the previous year. Food products accounted for 51% of sales. The growth of the segment is expected to slow down as the growth of the market is limited by low population growth. Typical Korean hypermarket stores target areas with a minimum population of 150,000 people. Many new department store projects have been canceled by protests from small grocers and NGO groups to protect traditional street markets. The Retail Industry Development Act, introduced by the hard-pressed government in January 2013, requires large retail stores to close in the evenings and at least two full days per month.

In 2016, total supermarket sales were 27.5 billion euros, 4.3% more than the previous year. Grocery products accounted for 84.5% of the supermarket segment. Small to medium-sized independently owned supermarkets account for over 70% of segment sales. Large supermarkets owned by dominant retailers have experienced stagnant growth since 2012, largely due to government regulations intended to protect traditional street markets.

The total sales of department stores in 2016 amounted to 21.8 billion euros, 2.3% more than in 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 reduces consumption of brands in department stores. Department stores are likely to continue to be the leading retail channel for high-quality imported premium products, including in the food sector. Therefore, key players in the segment made significant investments to allocate additional retail space to luxury brand shops and specialty products. However, the share of food and agricultural products in department store sales is declining.

Suitable for:

• South Korea – future market for renewable energies

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

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

Suitable for:

• South Korea is a pioneering online retail market worldwide

South Korea's level of food self-sufficiency is around 30%, as only 18.1% of the national territory is suitable for agriculture. The country is therefore dependent 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 every year as a result of urban expansion. South Korea relies heavily on imports as local supplies alone are not sufficient and consumer demand for quality and variety is ever-increasing.

Suitable for:

• Urban growth – How Japan is setting the course for the future

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

Suitable for:

• E-Mart: Expansion of sales channels and e-commerce strategy

 

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 for 5 to 50 cars
• Employees 3 to 15 full-time, 1 to 10 part-time
• Item inventory: 4,000 to 30,000
• Daily turnover: 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 for 500 to 700 cars
• Employees 100 to 150 full-time, 5 to 20 part-time
• Item inventory: 4,000 to 30,000
• Daily turnover: 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 for 700 to 2,000 cars
• Number of daily buyers: 2,000 to 25,000
• Purchase value per consumer: 39 to 77 euros

Well-known markets in South Korea

7-Eleven
The international convenience store chain 7-Eleven from Japan is represented on the market in South Korea with over 7,000 locations.

Ministop
Ministop is a Japanese convenience store (franchise) chain founded in 1980. In contrast to other chains of this type, Ministop offers an integrated kitchen in which sandwiches and snacks are prepared. Guests have the opportunity to eat on site. Ministop opened its first branch in South Korea in 1990. Today the company has 1,601 branches across the country.

Buy The Way
Buy The Way is a South Korean convenience store chain operating under parent company Lotte 7-Eleven. The chain's first branches opened in Shinchon, Seodaemun-gu, Seoul and Sinchon in 1991. By 2005, the company operated over 1,000 stores across 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. In order to give the company its own identity or individual identification mark, FamilyMart in South Korea was renamed “CU”. Today, CU has 7,950 stores across South Korea with the motto “Convenience for you”.

Lotte Mart
Hypermart – Lotte Mart is part of the South Korean Lotte Group, which is considered one of the most important conglomerates in South Korea. As such, Lotte Mart is one of the leading retailers with an extensive range of groceries, clothing, electronics and other everyday goods. The first branch was founded in Seoul in 1998. Lotte Mart is also represented internationally with 199 branches (as of 2011) in China, Vietnam and Indonesia.

E-Mart
Hypermart – E-Mart is the largest discount chain in South Korea and was founded in 1993 by the Shinsegae group of companies. With 150 locations, 2013 sales were $8.38 billion, which represented a 16% grocery retail market share. An online store and nine wholesale markets in the country complete the various sales channels within South Korea .

Homeplus
Hypermart – Homeplus is the second largest South Korean discount chain behind Emart of the Shinsegae Group. Homeplus has 885 branches across the country with over 25,000 employees.

Costco Wholesale Korea, Ltd.
Hypermart – Costco has 15 large-scale stores in South Korea, where groceries are sold alongside 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. founded.

GS Supermarket
Supermarket – GS Supermarket is a leading supermarket chain in South Korea owned by GS Retail company. The company's other distribution chains include GS25 (a leading brand of convenience stores in South Korea), Watsons (health and beauty), Fresh Serve (foodservice) and Parnas Hotel (hotel).

Lotte Department Store Department
Store – Lotte Department Store is one of the largest department store chains in South Korea, located in Sogong-dong, Jung-gu, Seoul, South Korea. Lotte Department Store was founded in 1979 and is one of the 8 business divisions 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 around 11,000 employees.

Shinsegae Department Store department
store - Shinsegae is a South Korean group of companies based in Seoul, which operates department stores in the lower price segment in South Korea under the name Shinsegae Department Store for high-quality goods and 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
Department Store – Hyundai Department Store is one of the three major department store chains in South Korea, along with Lotte Department Store and Shinsegae. The chain has 14 locations and more than $340 million in annual sales. The parent company is Hyundai Department Store Group.

Compared to Germany

According to the EHI Retail Institute, sales in organized food retail in Germany were 166.0 billion euros in 2019, of which 74.5 billion were generated by discounters alone. The total number of grocery stores in Germany continues to decline. In 2010 there were still 39,288 grocery stores in this country; six years later there were only 37,682 left. In 2019 there were 37,418 points of sale. Although grocers are experimenting with small store concepts, small space overall is losing significant ground. Of the 11,193 small grocery stores (up to 400 square meters) in Germany in 2010, 8,550 remained last year.

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

Suitable for:

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

Not the same, but similar sales concepts can help.

Suitable for:

• Local decentralized hubs – logistics centers

 

Source: Federal Ministry of Food and Agriculture

• enviacon international
• Funding from the Federal Ministry of Food and Agriculture (BMEL)