Find out about the retailer's strategic priorities, commercial focus areas, channel and country presence.

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This in-depth guide to South Korea explores the key trends in grocery retail and the growth strategies of the leading retailers in the country.

Get up to speed on all of the latest retailer results, the insight into what is driving growth and IGD's five big trends to watch in Asia in 2019.

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Customers at select GS25 convenience stores in South Korea will be able to charge shared electric bicycles from June.

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South Korea’s FTC (Fair Trade Commission) approved a set of voluntary rules agreed by convenience store operators to better protect struggling franchisees.

Minimum distance between stores

Five members of the Korea Association of Convenience Store Industry, CU, GS25, 7-ELEVEN, MINISTOP, C-SPACE and Emart24, came up with a voluntary agreement to curb excessive competition.

A key centerpieceof the agreement is that stores of rival brands should be at least 50 metres away from each other. This is the first time the convenience stores have set the minimum distance since 2000.

Move to ease market saturation

FTC’s approval will see the voluntary agreement to be applied to to 96% (38,000) of convenience stores nationwide.

The number of convenience stores has risen sharply to at least 40,000 last year, driven by an increase of single-member and two-people households.

Kim Sang-jo, chairman of the FTC, said the regulations could ease saturation and prevent reckless new openings in areas where there are already many existing stores.

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South Korean convenience chains CU and GS25, operated by BGF Retail and GS Retail respectively, have seen a recovery in their results for the first half.

BGF Retail's sales up 12.3%

CU convenience chain recorded a net profit of KRW45.3bn (US$40.2m) from April to June, an increase of 105% from the first quarter of this year. Sales increased 12.3% to KRW1,478.5bn (US$1.3bn) compared with the first quarter. The retailer added 162 stores, ending the period with 12,897 CU stores - maintaining its position as the largest convenience chain in South Korea. It noted growth in meal replacement categories - a key and growing trend that is driven by the increase of smaller households throughout the country.

In June last year, BGF Retail decided to separate itself into a holding company, BGF, and an operating company, BGF Retail. The entities separated on 1st November 2017, therefore YoY comparisons have not been published. Click here to see how the retailer performed in 2017.

GS Retail's sales up 5.3%

GS Retail has posted a 5.3% YoY increase in sales to KRW2,198.9bn (US$2bn), with operating profit up 4.9% to KRW55.7bn (US$49.3m) for the second quarter. This is strong turnaround in profitability after a challenging set of annual results.

The retailer's primary retail banner, GS25, saw revenue rise 4.3% to KRW1,669.7bn (US$1.5bn), with operating profit up 1.7% to KRW65.3bn (US$57.9m). It increased its convenience store network by 8.5% YoY to 12,772 stores. Growth was driven by the development of new products, with private label accounting for 36.7% of GS25’s sales (excluding alcohol and cigarettes) last month.

The performance of the GS Supermarket, the retailer's supermarket banner, was largely in line with last year. Revenue increased 2% YoY to KRW373.2bn (US$330.9m), driven by a net increase of 12 stores. It ended the second quarter with 291 supermarkets.

We review some of the latest developments at Shinsegae, GS Retail and Ministop Korea.

Shinsegae to open flagship VIDIVICI store in China

Shinsegae International is opening a cosmetics flagship store for its VIDIVICI beauty brand in China late next year. It will launch a new premium lotus-themed skincare range prior to the opening. Korean beauty products are reputable and widely popular across Asia. Shinsegae's new store will look to target the growing demand for premium and exclusives, setting up a base to strengthen and exhibit its products.

---Emart opens Scentence in Saudi Arabia

Shinsegae's E-Mart has opened a 66 sq m beauty store in Riyadh, the capital of Saudi Arabia. Last November, Emart signed an agreement with Fawaz Alhokair to open Scentence at the Al Nakheel Mall.

Like other South Korean cosmetic companies, Shinsegae's decision to enter the Middle East will have been driven by the growth of the cosmetics market in the region. Its entry is also part of a wider plan to increase the reach Emart's brands overseas. 

Emart's Jung Kyung-ah said, 'Scentence is expected to post stable growth in the new market on the back of the Middle Eastern beauty market’s raid expansion and the popularity of K-beauty[...]'.

Cafe 25 available in 10,000 GS25 stores

After launching its private label coffee brand 30 months ago, GS Retail via its convenience chain GS25 has made Cafe 25 available in 10,000 stores in South Korea. The total number of coffee products sold has already surpassed 100m, with Cafe 25 selling 40m cups in the first half of this year alone. To celebrate the milestone, the retailer will be selling 50,000 promotional coupons online via Gmarket and Auction. This will allow customers to buy iced lattes and iced amercianos for half the usual price.

Ministop Korea operations under review

Operations at South Korea's fifth-largest convenience store chain, Ministop Korea, is under review. The retailer faces intense local competition, with CU, GS25, 7-Eleven and Emart 24 operating over 36,000 convenience stores between them and growing. 

Ministop’s sales reached KRW1.2tn (US$1 billion) last year, but falling profits has led to parent AEON appointing Nomura Securities to explore sale options. AEON said, 'Even though we are considering business tie-ups with other companies to improve corporate value, there are no concrete plans on selling off Ministop Korea yet.'

AEON currently owns 76.06% Ministop Korea with local Daesang Group holding 20% and Japan’s Mitsubishi the remaining 3.94%. With 2,528 stores, Korea is Ministop's largest market. This is larger than its domestic market, Japan, with 2,240 stores, and significantly larger than other overseas markets; the Philippines at 488, Vietnam at 124 and China (Qingdao) at 67. It exited Indonesia in 2016, terminating the franchise agreement with Indonesian retailer Bahagia Niaga Lestari (BNL) after failing to gain traction in the market.

GS Retail has announced a KRW33bn (US$29m) investment in US online retailer Thrive Market.

Offering more exclusive products

GS Retail has signed an agreement with Thrive Market to boost its offer in organic foods. The Korean retailer will sell popular Thrive Market products at its operating banners GS25, GS Supermarket and Lalavla (previously Watsons) within a year, bringing more exclusive products in-store. This is GS Retail's first overseas investment.

More about Thrive Market

Established in July 2015, Thrive Market is an online store that sells organic products at reduced costs. Customers pay US$60 annual membership fee to 'join the community', allowing them to save money on a vast range of healthy products. Products from various categories are available, including food, beauty, healthy, home and pet.

Thrive Market has been recording an average annual sales growth of over 40 percent, and sales are expected to reach KRW200bn this year.

 

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