S. Korea’s retail sector enters fierce battle over gov’t cash vouchers

Convenience stores, superstores battle for customers ahead of consumption coupon distribution starting July 21

A sign at a convenience store in Seoul indicates that livelihood recovery consumption coupons can be used. /Newsis

South Korea’s retail sector is bracing for fierce competition as the government begins distributing cash handouts worth up to 550,000 won per person starting July 21, aiming to boost spending and revive the economy. Convenience stores—limited to franchises with annual sales under 3 billion won—are stepping up efforts to capitalize on the payments, while large supermarkets excluded from the program are working to minimize potential losses.

Convenience store chains have added premium items such as Korean beef, eel, and abalone to attract customers who usually shop at large discount stores. In response, major superstore chains are planning large-scale discount events despite anticipated losses, concerned about declining foot traffic.

Graphics by Rhee Choul-won

Convenience store chains on July 17 announced special promotions, drawing on lessons from the COVID-19 pandemic. GS Retail (GS25) and BGF Retail (CU) saw their sales rise more than 6% in the third quarter of 2020 after emergency relief funds were distributed. They expect similar growth this time, especially since the coupons cannot be used at large supermarkets.

GS25 will offer a variety of fresh products including Korean beef, short ribs, eel, abalone, and apples. Ten abalones from Wando or 300 grams of freshwater eel will each be sold for 19,900 won. A GS25 representative said that in 2020, four of the top 10 best-selling items after relief funds were meat products. Emart24 will launch special sets like LA-style short ribs and Jeju black pork belly timed with the coupon release.

CU plans to offer discounts of 33 to 50% on items like instant noodles and ready meals such as sweet-and-sour chicken, jellyfish salad, and tofu sushi. These discounts will run for five days starting July 22. Another convenience store chain, 7-Eleven, will expand its “buy one, get one free” deals on selected noodles and ice cream from July 21 until the end of August. A spokesperson said over 2,000 items will be included.

Large supermarkets worry that the cash coupons will draw customers to convenience stores. Already struggling with weak consumer demand and strong e-commerce competition, they see this as another challenge. According to a recent Korea Chamber of Commerce and Industry report, superstores were the only retail category with a negative business outlook in the third quarter, scoring 89 on the Retail Business Survey Index (a score below 100 signals a negative outlook).

The employee council at Homeplus noted that in previous relief programs, when large supermarkets were excluded, sales dropped as much as 20% compared to the same period a year earlier.

Still, hypermarket chains are fighting back with aggressive discount campaigns. Starting July 17, Emart will run a three-week sale on seasonal fruits, vegetables, and meats. It will combine government subsidies from the Ministry of Agriculture, Food and Rural Affairs with its own discounts, offering items up to 36% below regular prices. Lotte Mart will run similar promotions on fruits, vegetables, and grains through July 23.

Delivery app companies are also joining the competition. Since the cash coupons cannot be used directly within the apps, companies are focusing on helping customers understand how to use them. Coupons can only be applied when the delivery person brings a card reader from the restaurant, a method known as “meet and pay.” Yogiyo on July 17 announced it would provide detailed instructions on how to order and pay with the coupons. The app is also being updated to help users find stores that accept the coupons.