'We saw an opportunity': Eland looks to convenience stores as brick-and-mortar struggles

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'We saw an opportunity': Eland looks to convenience stores as brick-and-mortar struggles

Audio report: written by reporters, read by AI


Despite the convenience store market being saturated in Korea, it is also one of the only offline retail sectors that has seen significant sales growth in recent years. Pictured is a customer looking at items displayed at a convenience store in Seoul on Oct. 23, 2024. [NEWS1]

Despite the convenience store market being saturated in Korea, it is also one of the only offline retail sectors that has seen significant sales growth in recent years. Pictured is a customer looking at items displayed at a convenience store in Seoul on Oct. 23, 2024. [NEWS1]

 
Korea has the most convenience stores per capita in the world, with a shop for every 920 residents.
 
But even a saturated market isn’t stopping newcomers, like fashion giant Eland, from further expanding their convenience store businesses. That’s because the convenience store market, despite being full of competitors, is the only brick-and-mortar retail sector that is growing.
 
Eland, parent company of clothing and footwear brands like SPAO and New Balance, said Friday that it will franchise one of the five Seoul branches it has directly managed since 2023. The new owner of the branch will be a retired Eland employee who worked in retail. Eland sees franchising as a growth opportunity for its convenience store business after 18 successful months of directly managing the branches.
 
“We increased the amount of fresh produce to account for 20 to 30 percent of goods, but we saw an opportunity for growth, as there’s quite a number of multiplex housing areas that don’t have supermarkets or convenience stores,” a spokesperson for Eland said.
 
“It is unlikely that we will expand on a large scale in a short time, but we are trying a trial run with the franchising system.”
 
Fashion retailer Eland is franchising one of its five convenience stores in Seoul that the company has directly managed since 2023. Pictured is a Kim’s Convenience Store operated by Eland in Gangseo District, western Seoul. [ELAND KIM’S CLUB]

Fashion retailer Eland is franchising one of its five convenience stores in Seoul that the company has directly managed since 2023. Pictured is a Kim’s Convenience Store operated by Eland in Gangseo District, western Seoul. [ELAND KIM’S CLUB]

 
Eland is entering a competitive market. A total of 55,194 convenience store branches were operating in Korea under major chains CU, GS25, 7-Eleven, Emart24 and CSPACE24 as of the end of 2024, according to the Korea Association of Convenience Store Industry. The number of stores grew by 7,152 in four years.
 
It’s also the only market that has seen offline growth as people buy more from online spaces. The offline retail market’s total revenue grew by 3.7 percent on year in 2023, but the convenience store sector grew by 8.1 percent, according to the Ministry of Trade, Industry and Energy. It recorded 5.2 percent sales growth in the first half of 2024.
 
 
The increased demand for goods and services provided at convenience stores is the leading contributor to the sector’s growth. The proportion of single-person households in Korea grew from 24.6 percent in 2000 to 59.5 percent in 2020; that demographic is a major consumer at convenience stores, which are near their houses and where they can buy small amounts of food.
 
“The advantage of convenience stores was brought into focus during the Covid-19 pandemic as they were a place that people could buy items of casual clothing without meeting anyone,” a worker in the convenience store industry said.
 
Convenience store chain CU launched its own ″Dubai-style chocolate″ during the craze for the chocolate bar with pistachio filling. The products are displayed at a store in Seoul on July 8, 2024. [NEWS1]

Convenience store chain CU launched its own ″Dubai-style chocolate″ during the craze for the chocolate bar with pistachio filling. The products are displayed at a store in Seoul on July 8, 2024. [NEWS1]

 
Convenience stores also started offering all kinds of services to separate themselves in the offline retail market as supermarket chains instead focused on their online marketplaces to compete with e-commerce platforms.
 
Consumers have typically regarded convenience stores as miniature supermarkets and sought them out only when they needed items urgently after supermarkets closed down or when grabbing a drink or a snack.
 
To get rid of this perception, convenience stores have started becoming more like general stores with their wide portfolio including courier services, laundry collection, banking and selling common drugs. Even automated teller machines in the stores, which used to only allow deposits and withdrawals, have been replaced by smart teller machines (STMs) that allow consumers to create bank accounts, reissue bank books, create debit cards or talk to a clerk.
 
Convenience stores have also found success with exclusive products. The chains have launched private brand (PB) products or items created collaboratively to include popular characters or other media intellectual property and banked on their exclusivity. PB products, like pistachio chocolate created during the Dubai chocolate craze and items made collaboration with Netflix or celebrity chefs from hit show “Culinary Class Wars” (2024) are such examples. Foreign tourists come to Korea with lists of items to buy that are only sold at convenience stores.
 
Convenience stores have seen a rise in sales for lunchboxes with the prices of eating out and groceries high. Pictured are lunchboxes at a convenience store in Seoul on Oct. 28, 2024. [NEWS1]

Convenience stores have seen a rise in sales for lunchboxes with the prices of eating out and groceries high. Pictured are lunchboxes at a convenience store in Seoul on Oct. 28, 2024. [NEWS1]

 
Cheaper meals like gimbap (seaweed rice rolls) and lunch boxes are also steady sellers at the shops as the prices of groceries and eating out soar. “Lunchflation” — the rise in lunch prices — has continued, making it hard for customers to grab a bite at a price lower than 10,000 won ($7). The cost-efficient meals sold at convenience stores are therefore popular among office workers and students. CU’s lunch box sales rose by 24 percent on year in 2024, according to the chain’s operator, BGF Retail.
 
Experts, however, also caution about limits to the sector's growth due to market saturation and weak domestic demand. Between 2,000 and 3,000 convenience stores, on net, were opening each year between 2020 and 2023, but the increase faltered in 2024, when the total number of branches fell by eight.
 
“The number of convenience stores has largely increased as store owners have started to open stores under the widespread perception that they are comparatively easier to launch,” said Oh Kyung-seok, team head at the Korea Association of Convenience Store Industry.
 
“But without differentiating factors that can draw in customers, such as a good location or popular products, stores can fall behind in the competition.”

BY CHOI HYUN-JU [[email protected]]
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