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[Korea and the fourth industrial revolution] In retail, ‘offline’ translates into ‘endangered’

July 03,2017
Futuristic technology is fun and may grow the businesses of retail giants. At the same time, it’s pushing some brick-and-mortar stores out of business.

Korean retailers are taking the issue very seriously, including some very big ones.

“Sales of Japanese supermarkets have halved in just 15 years,” Chung Yong-jin, vice chairman of Shinsegae Group, said recently during a company event. “Korea’s supermarkets are also endangered. They could be outperformed by shops that are closer, more fun and more interesting in a changing paradigm.”

Revenues of Korea’s online shopping outlets jumped 18.1 percent last year, while sales offline - in brick and mortar stores - only rose 4.5 percent, according to the Ministry of Trade, Industry and Energy.

“Offline stores that sell products that don’t need to be examined personally before buying are definitely in crisis,” said Seoh Kee-man, director of LG Economic Research Institute.

The crisis can already be felt in the United States, where innovative e-commerce companies like eBay and Amazon continues to reshape the future of retail.

Last year, the venerable Macy’s Department Store announced it will close down 68 branches nationwide and lay off 10,00 employees. Sears, another traditional department store brand, said it will close 150 locations and shift its focus to an online platform. Last March, J.C. Penny unveiled a list of 130 branches it plans to close down this year, which will result in 5,000 layoffs.

Swiss bank Credit Suisse issued a report in June predicting the closure of 8,670 brick-and-mortar stores in the U.S. by the end of this year. In the next five years, 25 percent of all offline stores will close, it said. Some in the industry thought that report overestimated the crisis. Yet, it is undeniable that offline shops need to find a way to survive in the technology-affluent shopping realm.

Chung Min, a researcher from Hyundai Research Institute, says traditional retailers have to think outside the box and shift the existing role of offline stores, which has been solely focused on generating sales, to something else.

Shinsegae’s large Starfield Mall has taken on the challenge. In its Hanam branch, instead of filling in the venue with cookie-cutter shops, it opened a spa, an in-door sports complex and entertainment arena.


BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]


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