Stores fear profit, job losses if business hours curtailed
Local governments are pushing to quickly enact an ordinance that will reduce business hours for discount store chains and super-supermarkets (SSMs), raising the ire of retailers.
The Seoul Metropolitan Government has notified its 25 local district offices to prepare for an ordinance that will forbid discount chain stores and SSMs run by retail giants E-Mart, Homeplus and Lotte Mart from opening between the hours of midnight and 8 a.m. every day, it said on Wednesday. The regulation also compels them to close for at least two days a month in a bid to protect the interests of small merchants.
A total of 64 discount chains and 267 SSMs in Seoul will be affected when the new ordinance takes effect, which could happen as early as next March.
The Seoul city government will meet with local district offices in order to discuss how to prepare for the changes, such as determining which days of the week large retailers will be told to shut their doors on.
The move comes after the National Assembly’s Knowledge Economy Committee passed a revised version of the Retail Industry Development Act in December to protect mom-and-pop stores.
But the new ordinance is already facing strong opposition from the discount chains as they generate more revenue from Seoul than anywhere else in the country.
Meanwhile, Jeonju in North Jeolla is serving as a test bed for the new ordinance after the city’s metropolitan council passed a similar regulation on Tuesday that requires discount chains and SSMs to close on the second and fourth Sundays of each month.
Even though the law has not yet taken effect, it has reportedly already sparked a public backlash. Furthermore, officials at local discount stores have urged city officials to reconsider the move, fearing that local governments will follow suit.
Industry sources said that seven discount stores and 18 SSMs in the city will be affected when the regulation officially takes effect there in March.
The cities of Busan, Incheon, Gwangju, Daegu, Changwon in South Gyeongsang, Iksan, North Jeolla, and Chuncheon in Gangwon are apparently all mulling introducing comparable regulations to safeguard the livelihoods of small businesses, an issue that has taken center stage of late and received the support of President Lee Myung-bak. Several chaebol daughters recently withdrew their bakery business plans after a spate of negative press over the issue.
The new ordinance is drawing almost as much flak.
“We respect the government’s moves to protect mom-and-pop stores, but a regional government forcing discount chains and SSMs to close on Sundays is too harsh,” said an industry source who works at one of the targeted retailers. “Most working couples come to buy fresh groceries and other items on the weekend because they don’t have time to shop during the week. The regulation will hurt our sales, but it also greatly inconvenience shoppers.”
He added that many discount stores rake in around 40 percent of their profits on weekends.
Another official at a local discount chain pointed out that restricting business hours will cause job losses and also hurt the sales of small business owners that run pharmacies, hair shops and food courts on the larger retailers’ premises by renting space there.
This came to the fore on Wednesday when a group of merchants that run small shops in discount stores in Jeonju staged a protest in front of city hall.
“We also belong to the group of small retailers that you are trying to protect,” said one of their representatives. “If the mega store has to close on Sundays, our revenues will drop by up to 30 percent. It will also be a major hassle for Jeonju’s 600,000 citizens.”
Other industry sources said the government must intervene to ensure local governments stay consistent in deciding mandatory holidays, citing a potential disruption of shipments of fresh groceries at retailers’ logistics centers.
Customers, especially working couples, expressed concern about the new regulations.
“I pray that the city government doesn’t designate Sunday as a mandatory holiday,” said Moon Mi-young, a 36-year-old company worker in Seoul. “If that happens, more people like us will be crammed in on Saturdays, and it will just be insane.”
The Korea Chainstores Association calculates that discount chains will suffer annual losses of 1.4 trillion won ($1.26 billion), or 170 billion won for SSMs, if they are forced to close on one Sunday per month across the nation.
Lee Kwang-lim, an official at the association, said it is mulling bringing the issue to the Constitutional Court in a bid to prevent it being enacted as it believes the measure infringes on both customers’ and discount stores’ rights.
By Kim Mi-ju, Kwon Sang-soo [email@example.com]
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