The Convenience Store Turnaround: Sales Rise Even as Stores Decline

Sales Up 3.7% in the First Half
Rebound Amid Declines for Hypermarkets and SSMs
Second-Quarter Results Expected to Recover

The convenience store sector is experiencing a revival. Despite sluggish domestic demand and slowing consumption, sales in the first half of this year have returned to growth and continued their upward trend for twelve consecutive months through June. Analysts say this performance reflects the impact of a business strategy shift away from growth driven by expanding the number of stores, toward boosting store efficiency and strengthening product competitiveness.

According to the Ministry of Trade, Industry and Energy on July 30, convenience store sales in the first half of this year rose by 3.7% compared to the same period last year. This was due to both a base effect, as sales had declined by 1.0% in the first half of last year, and the impact of an early heatwave, which drove up sales of seasonal items such as beverages, ice cream, and alcohol. Sales in June alone also increased by 5.1% year over year.

In contrast to the 7.3% and 6.6% year-on-year declines in first-half sales at hypermarkets and supermarkets (SSMs), the recovery in the convenience store sector is particularly marked. As economic uncertainty grows, consumers favor smaller, more frequent purchases at nearby locations over large, bulk purchases, and this trend toward limited-quantity, local consumption has worked to the advantage of convenience stores.

What is noteworthy is that sales are rising even as the number of stores declines. The number of stores among the four major convenience store chains peaked at 54,893 in 2023, then dropped to 54,852 in 2024, and further to 53,266 last year. This marks the first decrease in the number of stores since the introduction of convenience stores to Korea.

This indicates a shift in the industry's growth paradigm. Previously, sales growth went hand-in-hand with opening new stores. Now, however, with most prime retail areas already claimed and rising labor, rent, and electricity costs squeezing profit margins, simply opening more stores no longer guarantees profitability. This has prompted a strategic pivot from expanding store count to shedding low-performing outlets and focusing on boosting sales at existing locations.

The industry is placing the greatest emphasis on revamping product assortments. Convenience stores are increasing the share of higher-margin private brands (PB) and exclusive goods, as well as strengthening product lines with high purchase frequency such as meal boxes, ready-to-eat meals, desserts, and liquor. Stores specializing in specific product categories—such as ramen, beauty products, or desserts—are not only improving brand image but are also being used to test consumer demand across different commercial districts.

The approach to store operations is also evolving. Automated ordering and demand forecasting systems are being used to lower inventory and waste costs, while unmanned payment systems and late-night unmanned operations help reduce labor expenses. Underperforming stores are being closed during contract renewal, and for new stores, projections for sales and profitability have become more important than simply increasing the number of openings.

Citizens are browsing products at a convenience store in downtown Seoul. Photo by Yonhap News

These changes are crucial to profitability for the headquarters of convenience store chains. Last year, GS25 and BGF Retail, operator of CU, both posted revenues exceeding 8 trillion won, but their operating margins remained in the two-percent range. With profit margins low relative to total sales, future performance will likely depend on growth at existing stores, product margins, and logistics expense reductions, rather than opening new stores.

Second-quarter results this year are expected to serve as a key test of whether revenue and profit are recovering. Early summer temperatures have lifted sales of beverages and frozen treats, and there is also a base effect from last year’s poor performance. However, for sales growth to lead to improved operating profit, the key will be how well retailers have controlled discount and promotion expenses, as well as labor and logistics costs.

An industry official stated, "The important thing in the current convenience store market is not the number of stores, but whether existing-store sales are actually growing, and whether the increased share of private brands and ready-to-eat meals is improving product margins. In assessing second-quarter results, we should focus less on topline sales growth and more on the recovery in same-store growth rates and operating margins."

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