Retailers compete to expand Mongolian presence as demand grows

Local Mongolian customers are looking around Homeplus’ own brand (PB) products at a discount store run by Mongolia’s local company Circle. [Courtesy of Homeplus]

Major South Korean retailers, including CU and GS25 convenience stores as well as hypermarkets such as Emart Inc. and Homeplus Co., are competing to increase their share of the Mongolian market. Mongolia has a relatively small total population of 3.3 million but a large number of active consumers with more than 60 percent of the population under the age of 35. The country’s affinity for Korean content and culture is another reason domestic retail companies are actively seeking to enter the Mongolian market, with Korean retailers looking to expand into Central Asia in the long run with Mongolia as the starting point.

According to the industry on Monday, there are currently nearly 600 Korean hypermarkets, convenience stores, and franchise stores in Mongolia, with convenience stores accounting for the largest portion. The number of Korean convenience stores recently surpassed 500 a mere four years after entering the Mongolian market.

CU, a convenience store chain operated by BGF Retail Co., first entered Mongolia in 2018. It opened 300 new stores early this year and increased that number to 336 at the end of last month. GS25, another Korean chain of convenience stores operated by GS Retail Co., set foot in Mongolia in 2021 and has been rapidly expanding in the country, with the number of its stores hitting 231 at the end of last month. Korea’s top hypermarket, Emart, opened its fourth store in the country this month and Korean bakery franchise TOUS les JOURS has 17 stores in the country.

Mongolia’s per capita gross domestic product (GDP) recently surpassed $12,000, and the country’s economic growth has been steep at 4.8 percent in 2022. The population is also growing rapidly with a fertility rate of 2.90 in 2022.

Domestic retailers noted that Mongolia’s capital, Ulaanbaatar, has a large consumer population but no channels for consumption. “When Emart opened its first store in 2016, there were barely any retail channels for people in the capital city to consume,” an industry official said. “Korea’s growth potential has reached its limit due to the declining birthrate and this is why the companies are turning to Mongolia, Vietnam, Indonesia, and Cambodia.”

Emart’s fourth store, which opened earlier this month after a four-year hiatus, strives to replicate Korean shopping culture. The store is modeled after one in Yeonsu District, Incheon, which reopened after renovation in May this year and has a kids cafe in addition to franchise restaurants and a food court. This is in line with the Korean shopping trend where the whole family shops, eats, and plays together.

Homeplus also signed an agreement with local company Circle Co. to sell more than 200 products under its “Homeplus Signature” private label at 14 stores in the Ulaanbaatar region. Lotte Mart has been supplying its private brand products since 2019 after signing a contract with Nomin Holdings Co., Mongolia’s top retailer.

The rapid growth of Korean convenience stores in Mongolia is largely attributable to the launch of Korean-style products unique to Korean convenience stores. Tteokbokki, hotteok, fish cake, and instant ramyeon have been placed at the front shelves, and local merchandisers planned for Korean-style food such as beef bulgogi gimbap, jeyuk gimbap, and tuna mayo triangle gimbap.

CU’s instant coffee, GET Coffee, has become so popular with average sales of 200 cups a day that the store launched GET Café Latte, a private label product exclusively for export, as the company discovered that more customers in Mongolia look for lattes. GS25 also sells Chicken 25, a Korean-style chicken product under its own brand name. “This is a good example of us localizing a popular product from a K-convenience store,” GS25 said. An industry official also noted that Mongolia is an attractive country, as retailers who succeed in the market can use the experience as a bridge to expand their presence into the Central Asian region.