Mall closures rankle small business owners

Ryu Mi-na owns her own clothing store in Starfield Goyang, a major shopping mall in Gyeonggi. She was dumbfounded to hear that the government was planning to force major shopping malls to shut down twice a month.

“Does it make sense to regulate such small business owners like myself to protect small businesses in the alleys?” Ryu asked. “We are people who need the same protection [as small neighborhood businesses].”

The National Assembly is currently debating a revision to the Distribution Industry Development Act that would force large shopping malls to close twice a month. The goal of the change is to help neighborhood mom-and-pop stores that have been affected by major malls, and the plan was part of President Moon Jae-in’s campaign promises. Small businesses that operate within these major shopping malls, however, say that the law is discriminatory.

“If I take two days off each month, I will see monthly sale losses of around two to three million won [$1,769 to $2,650],” said Ryu. “The impact would be too big. On top of the labor cost burden from the sharp increase to the minimum wage, additional regulations on business days would be too much.”

She said she’s thinking about closing her business entirely. The regulation may cause job losses, which would hurt the government’s efforts to boost flagging jobs numbers.

“My boss tells me she would have to reduce the number of employees if the mandatory closures are enacted,” said Hong Seo-jin, a 19-year-old university student who works part-time at Ryu’s store. “I’m worried since I’m paying for my tuition with the money I earn here.”

Hong said that if the regulation that restricts the business hours of stores at shopping malls is passed, the government should come up with measures that would ease the burden of the stores operating at the mall, such as helping out with rent.

The Korea Economic Research Institute (KERI) commissioned a survey from market research company Mono Research on 300 small businesses in three major shopping malls - Lotte World Mall in Jamsil, southern Seoul, Shinsegae’s Starfield Hanam in Gyeonggi and the Hyundai Department Store in Pangyo, Gyeonggi.

The businesses expected a 5 percent decline in their revenue on average if the regulation passes. These businesses’ annual revenue is less than 5 billion won, and they have fewer than 5 employees. According to the responses, the number of people the businesses employ will shrink by around 4 percent.

Nearly 82 percent were opposed to strengthening the government’s regulations on large shopping malls, while 11.3 percent said they weren’t sure. Only 7 percent agreed with them.

“In the process of discussing the regulations on large shopping malls, the small businesses that are operating within the malls are excluded,” said Yoo Hwan-ik, KERI director. “Politicians need to be prudent, as the regulation could have a significant adverse effect on such businesses’ sales and hiring.”

Many consumers are also opposed to the revision.

“I use the shopping malls not just to buy stuff, but also to hang out,” said 30-year-old office worker Kim Min-ji. “If the business hours regulation goes into effect, consumers will be robbed of their choices.”

Doubts have also been raised over whether the regulations will achieve their intended goal of protecting neighborhood businesses.

While the same rule currently applies to major discount stores such as Emart and Lotte Mart, there is no evidence that proves that cutting the days that major discount stores can operate has actually benefited local shops.

Some also argue that the revised bill is being rushed, especially as the clear definition of a large mall hasn’t been reached.

Large retailers are currently grouped into six categories - department stores, major discount marts, large shopping malls, shopping centers, specialist stores and others not falling under these categories. The boundaries between them, however, are not clear. Some establishments choose a category on their own, which adds to the confusion.

For example, Swedish furniture store IKEA is categorized as a specialist store, but some argue that it’s no different from a large shopping mall as it sells necessities as well as food and beverages.

“Even if the regulation goes into effect, it first needs to be clear on the standards that differentiate these different large stores,” said an industry official.

BY KIM MIN-JOONG [ebusiness@joongang.co.kr]