'Is Homeplus open?' becomes a question of political import.

A traditional market in Chuncheon, Gangwon, remains uncrowded even before a Lunar New Year holiday on Jan. 27. [YONHAP]

Retail restrictions are raising questions, with many people asking whether regulations put into place to protect traditional markets are actually effective.

They are on the chopping block again as two major presidential candidates lock horns over a campaign pledge to build a shopping complex in Gwangju.

People Power Party candidate Yoon Suk-yeol vowed to build the first shopping complex in Gwangju during a campaign event in the city on Feb. 16, emphasizing that Gwangju is the only big city in Korea with no large-sized shopping mall. Ruling Democratic Party (DP) candidate Lee Jae-myung immediately hit back, saying that Yoon overlooked the impact it would have on the local economy, especially small businesses.

Enacted in 2010, the Distribution Industry Development Act prohibits a discount mart from operating within 1 kilometer (0.62 mile) of a traditional marketplace to protect small businesses in traditional markets, and also requires large-sized retail chains to close twice a month and operate only between 10 a.m. and 12 a.m.

Small business owners argue that the restriction is essential, but the actual impact on promoting traditional markets remains unclear.

"Traditional markets and small businesses are in dire need of support as they were hit hard by the accelerating online transformation in the retail industry and the Covid-19 pandemic," said Lee Do-yeol, head of the communication team at the Small Enterprise and Market Service.

"Providing support in establishing online channels and a logistics system would be more helpful" than reinforcing the restrictions, he added.

Sales of specialized retail stores, which includes traditional markets, grew 28 percent since 2012 when it became mandatory for discount marts to close for two days a month. General retail industry grew 43.3 percent during the same period, with convenience stores expanding 135.7 percent and online stores 121.7 percent.

The discount mart sales declined 14 percent.

Both the specialized retail stores and discount marts shrank in terms of market share — specialized retail stores have 36.3 percent of the market, down from 40.7 percent in 2012, and discount marts 8.7 percent, down from 14.5 percent.

Consumers are especially skeptical about the effectiveness.

According to a 2021 survey conducted by the Federation of Korean Industries (FKI), 8.3 percent of 1,036 respondents answered that they would visit a traditional market when a discount mart is closed, 37.6 percent said they would go to a supermarket, and 28.1 percent said they would wait until the discount mart opens.

"Strengthening the regulation when consumers already prefer the discount mart will restrict consumer freedom of choice," said Kim Tae-yoon, head of the industrial strategy team of the FKI.

Retailers argue that the restrictions are hindering fair competition.

The rule that forbids discount marts to open during nighttime between 12 a.m. and 10 a.m. dragged down the large retail chains in logistics service competition, while e-commerce players such as Coupang and Market Kurly went ahead of the game with dawn delivery services.

"We already had a logistics infrastructure such as refrigerators and warehouses, but had to build a new logistics center specialized in e-commerce for dawn delivery," said an anonymous employee working in a domestic discount mart chain.

The pandemic-driven online shopping boom widened the gap between e-commerce marketplaces and offline retailers.

Lawmakers are coming up with legislative proposals to reinforce the current regulation.

DP lawmakers submitted a total of 10 amendment proposals related to retail regulations, which aim to strengthen and expand the current restrictions, even suggesting extending the minimum distance between discount mart and traditional market from the current one kilometer to 20 kilometers.

"If the law prohibits discount marts from operating within a 20-kilometer radius of traditional markets, there will be no space left for large marts at all," said an industry insider.

Experts said that local small businesses and big retailers shouldn't have to be enemies, unlike what the politicians claim.

According to a 2017 research by Suh Yong-gu, a marketing professor at Sookmyung Women's University, the number of visitors at traditional markets increased by 9.7 percent after a discount mart opened nearby, because new customers began to shop at both traditional market and the discount mart.

"Consumers go to a large shopping mall instead of a traditional marketplace because the two are separated from each other," said Lee Duk-hoon, the president of Korea Academy of Traditional Retail & Periodic Market, arguing that the connectivity between the two should be enhanced.

"What's important is building a new city, not a new marketplace," which means that it is impossible to promote the traditional market without revitalizing the local economy as a whole, he added.

BY LEE SO-AH [shin.hanee@joongang.co.kr]