Review of Overnight Delivery for Large Retailers Begins... Bill Passage Faces Multiple Hurdles

Amendment to the Distribution Act Referred to Subcommittee
KDI and Others Cite "Loss of Regulatory Effectiveness"
Group Risks such as Starbucks Controversy Pose Additional Challenges

Discussions in the National Assembly are gaining momentum regarding the proposed amendment to the Distribution Industry Development Act, which would allow large discount stores to offer online dawn delivery services. However, with opposition from small business groups and political parties closely monitoring voter sentiment ahead of the upcoming local elections, significant hurdles are expected before the bill can be passed.

According to industry sources on May 28, the National Assembly’s Trade, Industry, Energy, SMEs, and Startups Committee tabled the amendment to the Distribution Industry Development Act—which would ease regulations on late-night operations for large discount stores—at a general meeting on May 19 and subsequently referred it to a subcommittee for further review.

Under the current law, large discount stores and Super Supermarkets (SSMs) are prohibited from operating between midnight and 10 a.m., and are required to designate two mandatory closure days each month. The amendment maintains offline business restrictions but would lift late-night delivery bans for online orders only, allowing dawn delivery to proceed.

Chung Yongjin, Chairman of Shinsegae Group, is issuing a public apology on the 26th at the Chosun Palace Hotel in Gangnam-gu, Seoul, regarding the controversy over Starbucks' 'Tank Day'. Photo by Yonhap News.

"Coupang Can, But Discount Stores Can't"... Distribution Law Fails to Reflect Market Reality

The retail industry has welcomed the move. When regulations on large discount stores were first introduced in 2012, these stores dominated the market; now, however, the retail landscape has shifted dramatically to an online ecosystem led by Coupang. In fact, according to the Ministry of Trade, Industry and Energy, online sales accounted for 60.6% of total retail sales, while large discount stores made up only 8.1%. E-commerce platforms have captured the dawn delivery market without facing such operating restrictions, while only large discount stores remain subject to the full weight of offline-based regulations, leading to complaints about reverse discrimination.

Analyses by government think tanks have also lent support to calls for deregulation, indicating that restrictions on large discount stores have failed to achieve their original goal of protecting traditional markets. A recent study by the Korea Development Institute (KDI) found that, in areas where mandatory closure days were shifted from weekends to weekdays, traditional market sales did not decline. In contrast, sales at large discount stores increased and online shopping payments fell, suggesting that consumers had shifted to e-commerce rather than to traditional markets.

Small Business Owners Widen Opposition, Calling It a "Death Sentence for Local Commerce"

Yet practical obstacles remain formidable. Small business groups have reacted immediately and strongly against the introduction of the amendment. Organizations such as the Korea Federation of Micro Enterprises and the Korea Federation of Merchants issued a joint statement urging the withdrawal of the bill, asserting that "allowing dawn delivery for large discount stores will intensify the concentration of market power in favor of large corporations and deliver a death sentence to neighborhood businesses."

Additionally, the upcoming local elections next month are also hampering progress on the amendment. With the interests surrounding the amendment sharply divided, and political parties sensitive to both local voter sentiment and the self-employed electorate, pushing through deregulation ahead of the elections poses a significant political risk.

The controversy surrounding Starbucks’ 'Tank Day' event, which took place on the anniversary of the May 18 Gwangju Democratization Movement, has also emerged as a variable. If the amendment passes, the biggest beneficiary is expected to be Emart. With its nationwide network of stores and an established delivery system through SSG.com, Emart could rapidly expand into the dawn delivery market as soon as the regulations are relaxed. In particular, its strategy of utilizing offline stores as online logistics hubs through 'Picking & Packing' (PP) centers is expected to gain significant momentum.

Emart Poised to Benefit Most... Starbucks 'Tank Day' Controversy a Wildcard

From Emart's perspective, strengthening online competitiveness has become urgent. With the discount store sector continuing to stagnate, and with Coupang, Naver, and Chinese platforms such as Aliexpress and Temu ramping up their offensives in the domestic market, the position of traditional offline retailers is growing increasingly precarious. As SSG.com has also faced persistent deficits for years, the allowance of dawn delivery is seen as not merely an expansion of business hours, but as a key card for transforming the business structure.

However, the recent controversy over the Starbucks event, accused of disparaging the May 18 Movement, has escalated into a brand risk for Shinsegae Group. Opponents of deregulation have put forward the argument that it constitutes an "undeserved privilege for unethical conglomerates." There are concerns that Shinsegae’s historical and ideological controversies are providing strong ammunition for public opposition to deregulation. An industry insider commented, "Given the nature of the retail business, it is inevitably sensitive to both consumer sentiment and the mood in political circles. While there is consensus on the need for deregulation, considering the direction of public opinion, it will not be easy for politicians to reach a quick conclusion."

On the 27th, participants including the National People's Action performed a related performance at the press conference announcing the nationwide boycott of Starbucks and condemning Chairman Chung Yongjin's insincere scapegoating apology, held at Gwanghwamun Square in Seoul. Photo by Yonhap News

Nevertheless, there are voices calling for the swift passage of the amendment to restore the competitiveness of the distribution industry. A senior figure in the retail sector noted, "The amendment to the Distribution Industry Development Act is not merely about relaxing business hour restrictions, but a test for restructuring the domestic retail industry's ecosystem to keep pace with the rapidly changing global e-commerce environment. If institutional reforms continue to be trapped by political timelines and lose legitimacy due to unexpected corporate risks, the entire domestic offline-based retail sector could miss the golden opportunity for digital transformation, leading to a structural crisis."

They further emphasized, "In the modern retail market, corporate emotional trust and ESG (environmental, social, and governance) factors are the most practical variables influencing regulatory legislation. If Shinsegae Group fails to proactively overcome this risk, it will face even greater costs during the process of establishing itself in the market, even if the bill passes."

This content was produced with the assistance of AI translation services.