One in five convenience stores drops overnight hours as sales fall

(Lee Jin-han)

As South Korea’s economy grapples with sluggish consumer spending, small business owners are feeling the strain. Although new businesses are opening, a slowing economy has created a cycle of closures and empty storefronts that affects a variety of industries and regions alike.

Convenience stores, once known for their round-the-clock service, have been scaling back their hours. Rising minimum wages and declining profits have forced many of these stores, alongside other small businesses, to cut operating hours.

For instance, a convenience store owner in Seoul’s Seongdong district, who recently opened a store in an apartment complex, reduced his hours after just two months. “Initially, I hired a night shift worker, but there weren’t enough customers to justify staying open.” He added that the competition in the area had impacted his earnings more than he had anticipated. According to one convenience store operator, roughly 21 percent of stores opted not to operate 24 hours in 2023, up from 15 percent in 2019. Convenience store operators who cut overnight hours often face reduced revenue shares from their headquarters, but a growing number of store owners are choosing to forgo the overnight shift despite this financial setback.

The trend of shortened business hours and closures in major self-employed sectors has further implications. As these stores shut their doors or reduce hours, the vacancy rate among commercial properties rises, pushing down rental prices. Food and beverage establishments, a major component of South Korea’s small business sector, are also facing difficulties. High inflation has kept customers away, and restaurants that also offer delivery face a triple burden of declining demand, rising costs, and hefty delivery fees. In Seoul alone, 6,290 restaurants closed in the second quarter of 2024, a jump from 5,922 closures in the first quarter. This number even surpasses the 6,258 restaurant closures seen in the first quarter of 2020 during the pandemic’s peak.

Small business owners in Seoul are struggling with escalating costs. A pizza shop owner explained that despite selling a pizza and an oven-baked spaghetti for 32,000 won ($23.18), he only takes home about half due to delivery fees and advertising costs. “I started this business with borrowed money, so I need to pay off my loans, but with rising rent and high interest rates, it’s challenging,” he shared.

Similarly, a restaurant operator in Seoul’s Gangnam district, who specializes in grilled small intestines, recently decided to close on weekends. “Most of my customers are office workers who visit on weekdays. I used to open on Saturday evenings to keep the business running, but now it’s too difficult to manage even that,” he explained.

The prolonged economic downturn suggests that this year, the number of business closures in South Korea may surpass 1 million for the first time. In 2023, 910,819 business owners shuttered their operations, up nearly 14 percent from 799,636 in 2022, according to the National Tax Service. If this trend persists, the number of closures is expected to exceed 1 million by the end of 2024. With self-employed workers making up 25 percent of South Korea’s workforce, the country has one of the highest self-employment rates among OECD countries. The ripple effects of this trend could spell trouble for the broader economy, potentially shaking one of the core pillars of South Korea’s economic structure.