In regions that shifted large retailers' mandatory closure days from weekends to weekdays, sales at large retailers increased, but sales at traditional markets did not decline, according to an analysis. Instead, online consumption appeared to decrease. The weekend operating restrictions on large retailers may have expanded "online consumption" more than they protected "traditional markets."
The "two weekends a month" mandatory closure system for large retailers was introduced in 2012 to protect traditional markets and neighborhood shops. But as analyses indicate there is no clear substitution effect between large retailers and traditional markets, calls are growing to reconsider the system.
◇ Sales at large retailers, SSMs, and outlets mostly rose, while convenience stores fell
Korea Development Institute (KDI) stated accordingly on the 21st in a report titled "Policy direction implied by shifting mandatory closure days to weekdays."
The mandatory closure system for large retailers is a regulation that designates two closure days a month for large retailers and super supermarkets (SSMs). It was initially operated on the principle of closing on public holidays, but some local governments, including Daegu, Cheongju, Seoul, Busan, and Gyeonggi, have recently been switching the closure days to weekdays. As of Feb. last year, 30 cities, counties, and districts had shifted the mandatory closure days to weekdays, about 13% of all basic local governments.
KDI estimated the policy effect using a regression approach that compares the before-and-after monthly average sales trends of regions that switched to weekdays and those that did not. Simply put, if sales at large retailers in region A increased by 8 after the weekday switch, and sales in other regions increased by 3 during the same period, the remaining 5 is attributed to the weekday switch effect in region A. The aim is to isolate the impact of the weekday switch by excluding sales changes driven by nationwide consumption trends.
The analysis found that sales at large retailers consistently increased in key regions. The weekday switch effect was estimated at 4.7% in Daegu, 2.8% in Seoul, and 6.2% to 7.9% in Busan, relative to the previous year's monthly average sales. KDI said, "Dual-income households or those with children tend to concentrate spending on weekends," adding, "As shoppers are able to do their grocery shopping at preferred times, choice and convenience have expanded."
SSMs also saw sales gains of 3.4% in Daegu, 0.9% in Seoul, and 4.1% in Busan's Dongnae District. However, in Busan's Saha, Gangseo, Dong, and Suyeong districts, sales fell 1.3%. While sales growth was observed in modern large-scale retail formats such as shopping centers, shopping malls, and outlets, convenience store sales declined in some areas. KDI said, "As weekend access to large retailers recovered, some demand that had dispersed to convenience stores and SSMs may have shifted back to large retailers," adding, "Modern large-scale retail formats are largely centered on large retailers, so they appear to have benefited."
◇ Negative impact on traditional markets? Not so fast… "Other local governments should also consider weekday shifts"
Notably, there were no consistent results supporting a decline in sales at traditional markets and neighborhood shops. Although some regions in the household goods, food, and sundries category and in the agricultural, livestock, fisheries, and traditional distribution category showed negative estimates, KDI said it was difficult to deem the declines statistically significant. In Daegu's household goods, food, and sundries category and Seoul's agricultural, livestock, fisheries, and traditional distribution category, sales effects instead increased by 15.4% and 12.8%, respectively.
Online consumption, on the other hand, declined. An analysis of changes in online payment amounts in Daegu, the first city to implement the weekday switch, estimated a 2.89% decrease in online consumption. The downward trend was particularly pronounced among people in their 20s, 30s, and 40s.
KDI said, "Regulatory easing such as shifting large retailers' mandatory closure days to weekdays suggests that it may not lead directly to consolidation in sales declines for traditional markets and neighborhood shops," adding, "Some consumption may have shifted from online to offline channels." It continued, "In a retail environment where purchases are made with a single click, constraints on offline stores may act as a factor promoting the shift of consumption to online channels," adding, "Other local governments also need to actively consider shifting mandatory closure days to weekdays."