Debt relief a Band-Aid for small merchants, but the cure may be big-box stores

Korea is rolling out debt relief for small merchants, but experts say real recovery requires reviving local commercial districts with anchor stores, foot traffic and digital infrastructure.

A vacancy notice is posted on a commercial building in Jung District, central Seoul, on April 29. [NEWS1]

Korea is rolling out debt relief for small merchants, but experts say real recovery requires reviving local commercial districts with anchor stores, foot traffic and digital infrastructure — or risking sending merchants back into debt.

That risk is already visible on the ground. A woman in her 30s bought two bags of corn from a street vendor outside an Emart branch in Dobong District, northern Seoul, on June 16, before heading into the store with her elementary school-aged child.

A 64-year-old street vendor surnamed Kim said business depends heavily on foot traffic from the nearby big-box store.

“When the mart has enough customers and offers some discounts, we benefit too,” Kim said. “But when it’s closed on Sundays, hardly anyone passes by, so there’s no point in opening. We rest too.”

As President Lee Jae Myung continues to emphasize prioritizing support for small businesses, the government recently announced plans to establish a “bad bank” that offers underperforming businesses flexible loan repayment plans and implement debt-relief measures.

But experts warn that emergency debt cancellation alone will not be enough, as small businesses risk falling back into debt without revitalizing the local economy.

A sustainable solution, they argue, lies in injecting new life into commercial districts — and a key part of that is securing “key tenants” with strong customer draw.

One example is Mecenatpolis in Mapo District, western Seoul, where the opening of a large discount store and cinema helped revitalize the area.

Pop-up stores and distinctive local festivals can also serve as key attractions.

Myeong-dong in Jung District, central Seoul, plagued by a nearly 50 percent vacancy rate in 2022, saw that figure drop to 5.2 percent in the first quarter of this year, according to real estate services firm Cushman & Wakefield.

People walk along the streets of Myeong-dong in central Seoul on June 26. [YONHAP]

That turnaround was partly thanks to pop-up stores appealing to young visitors and tourists.

The Myeong-dong Festival, co-hosted by the Seoul Metropolitan Government and Lotte Department Store from 2023 to 2024, also helped the area’s recovery.

The event featured a stamp tour and various street foods and performances.

“We need to rethink the role of large retailers — not as competitors to small merchants but as potential key tenants,” said Lee Dong-il, a business professor at Sejong University.

He added that regulations limiting big-box stores or franchise chains in designated local co-prosperity zones, or mandating off-days for large discount stores, may ultimately harm surrounding small businesses.

Data from the Bank of Korea supports that view. After the closure of Lotte Mart branches in the Dobong and Guro districts in 2020, average revenue within a 2-kilometer (1.2-mile) radius in 2022 fell 5.3 percent compared to 2019.

With retail spaces increasingly serving as experience- and communication-oriented venues for MZ generation — collectively referring to Millennials and Gen Z in Korea — consumers, small-business districts also need to innovate.

Experts suggest improving content and infrastructure to make neighborhoods feel like desirable destinations.

Ideas include making private parking lots available to the public and easing restrictions on street parking to improve accessibility.

“Discounts alone won’t draw people in,” said Seo Yong-gu, a professor of business at Sookmyung Women’s University. “You have to give them a reason to want to visit — something fun, something different.”

With consumers actively embracing e-commerce, the government must also expand support for small business owners looking to go online.

Since 2020, the government has helped fund online marketing channels for small merchants, but budget constraints have limited annual beneficiaries to about 100,000 people.

Observers are calling for increased investment to ensure small businesses can build both online and offline sales channels, enabling them to compete in an increasingly digital retail environment.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff. BY HWANG SOO-YEON,NOH YU-RIM [paik.jihwan@joongang.co.kr]