More Online Shopping, More Trouble for Large Supermarkets... KDI Questions Effectiveness of Regulations

KDI Research Report

A 1% Increase in Online Spending Leads to a 0.264% Drop in Large Supermarket Sales

"Homeplus Crisis Cannot Be Explained by Management Failure Alone"

"Early Morning Delivery and Mandatory Closure Rules Should Be Eased"

Although sales at large supermarkets have declined due to the rapid growth of the online distribution market, certain segments of the offline retail sector—such as SSMs (Super Supermarkets) and convenience stores—have actually expanded. There are calls to ease regulations such as operating hour restrictions and mandatory closure days, which are currently applied only to large supermarkets.

On June 30, Lee Gong, a research fellow at the Korea Development Institute (KDI), stated these findings in the KDI Focus report titled "The Growth of Online Distribution and Directions for Distribution Market Policy Improvement."

According to the report, an analysis of monthly Shinhan Card payment data from January 2020 to December 2024, aggregated at the township level, showed that when per capita online spending increased by 1%, sales at large supermarkets decreased by 0.264%. This suggests that the expansion of online transactions can negatively impact the business of large supermarkets.

Citizens are selecting vegetables at a large supermarket in downtown Seoul. Photo by Yonhap News Agency

However, the expansion of online distribution channels did not always lead to a decline in offline retail sales. When per capita online spending in a region increased by 1%, sales at Super Supermarkets (SSMs) rose by 0.221%, convenience stores by 0.324%, and other specialty retailers by 0.356%.

When analyzing all business types together, a 1% increase in a region’s per capita online spending resulted in a 0.186% increase in total offline sales in that region. The number of consumers per offline store increased by 0.045%, and the number of offline stores also grew by 0.152%.

Researcher Lee explained, "This result does not align with the existing hypothesis that online and offline channels are in a competitively substitutive relationship."

Given that the business types with increased sales are mainly neighborhood-based, this suggests consumers are purchasing a variety of products online while continuing to use nearby offline stores. In contrast, large supermarkets—previously often frequented—are increasingly being replaced by online distribution channels due to factors such as travel costs.

The fact that Homeplus, one of Korea's top three large supermarket chains, has filed for corporate rehabilitation cannot be explained solely by a single company’s management failure. Even if the immediate crisis is overcome, the operational crisis facing the large supermarket sector as a whole is likely to persist structurally.

The introduction of same-day delivery systems like Coupang’s Rocket Delivery has not yet affected the overall sales of offline retailers. However, in areas where Rocket Delivery is available, a 1% increase in online spending resulted in a further 0.010% decrease in the number of offline transactions per consumer.

The number of consumers per offline retailer also declined by an additional 0.023%. If delivery systems continue to expand, this could eventually impact offline retail sales as well.

Researcher Lee pointed out, "While the online market is growing rapidly, the current regulatory framework is designed around offline channels, placing a disproportionate regulatory burden on specific business types. There are serious questions as to how effective large supermarket regulations are in protecting traditional markets."

He added, "If Chinese C-commerce platforms such as Temu and Aliexpress establish early morning or same-day delivery systems in Korea, there is a possibility that offline retailers’ sales will decline. It is important to monitor the impact of logistics advancements on offline distribution and flexibly reflect these findings in policy decisions."

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