The Crisis in Regional Retail: The Decline of Department Stores and Hypermarkets

the retail industry in regional South Korea has been rapidly declining

In recent years, the retail industry in regional South Korea has been rapidly declining. The rise of online shopping and decreasing population have led to the closure of numerous hypermarkets and department stores, severely impacting local economies and employment. This blog post explores the current state of regional retail, the underlying causes, and potential solutions to address these challenges.

The Decline in Regional Retail

The crisis in regional retail is becoming increasingly severe. Over the past five years, more than 80% of the hypermarkets and department stores that have closed were located outside of Seoul. Lotte Department Store, after closing its Anyang and Bupyeong branches in 2019, shut down its Masan store last month. Major hypermarkets like E-Mart, Lotte Mart, and Homeplus have also closed numerous stores in Gyeonggi, Incheon, and other non-capital areas.

Causes of the Decline

1. Rapid Growth of Online Shopping: E-commerce companies like Coupang and Kurly have significantly impacted offline stores with their expanded early morning delivery services. Their massive investments in logistics infrastructure have enabled them to extend delivery coverage nationwide.

2. Population Decline and Regional Economic Downturn: The decrease in population and economic stagnation in non-capital regions are major contributors to the decline in retail. While the population in the capital region continues to grow, non-capital areas are experiencing a decrease. Major cities such as Busan, Daegu, and Ulsan are not exceptions.

3. Retailers' Focus on the Capital Region: Major retailers are concentrating their efforts in the capital region for better profitability. Companies like Shinsegae Property and Lotte Department Store are opening large shopping malls in the capital region while closing stores in non-capital areas.

The Future of Regional Retail and Solutions

The collapse of regional retail will have a profound impact on local economies and employment. Offline retail is a labor-intensive industry with a significant impact on job creation. Its decline will accelerate job losses and population outflows from these regions.

Experts suggest drawing lessons from Japan, where retailers have adapted by offering services and products tailored to older adults. Additionally, regional retailers should consider hybrid models that combine online and offline shopping to enhance their competitiveness.

The decline in regional retail is a serious issue that affects not just the economy but the entire community. Facing the dual challenges of growing online shopping and declining population, regional retailers need to rethink their survival strategies and seek ways to coexist with the local economy. Without these efforts, the cycle of regional decline will likely accelerate further.