In the first half of this year, offline retail sales experienced negative growth for the first time in five years, while online food sales, which were perceived to have a relatively low penetration, saw a significant increase. As it is believed that consumers prefer to see groceries in person, the offline retail industry is seeking business diversification, such as selling private brand (PB) products on external online platforms.
According to the Ministry of Trade, Industry and Energy and the retail industry, offline retail recorded a negative growth of -0.1% in the first half of the year. In contrast, online retail grew steadily at 15.8%, increasing the growth rate gap compared to two years ago in the first half of 2023 (5.1%) to more than three times. By sector, large supermarkets (-1.1%) and convenience stores (-0.5%) saw negative growth, while department stores managed to increase sales by 0.5%, maintaining their pride.
Particularly, the online growth in the food sector, which was viewed as an 'offline-only domain,' has been remarkable. In the first half of this year, offline food sales increased by only 0.6% compared to the same period last year, while online food sales surged by 19.6%. In June alone, the growth rate of offline food sales decreased by 0.2% compared to the same period last year, while online sales increased by 24.1%. This indicates that online food competitiveness, previously assessed to be weaker than offline, is strengthening as online consumption becomes more common.
When examining the year-on-year sales growth rate of food by offline sector, department stores (1.3%) and corporations' supermarkets, known as SSMs (2.6%), experienced growth, while convenience stores (-1.7%) saw a decline. The increase in the number of single- and two-person households and the expansion of online shopping have led to a trend where consumers prefer to purchase smaller quantities close to home rather than at large supermarkets, driving the growth of SSMs.
Large supermarkets, where the share of food sales reaches 70%, maintained a stable growth rate of 0.5%. However, given that large supermarkets have recently been conducting ongoing ultra-low discount sales, some voices suggest that this is effectively negative growth. A representative from a large supermarket noted, "The results can be considered minimal compared to the continuous discount events held throughout the year."
The industry forecasts that competition between online and offline channels for essential consumer goods, such as food, will intensify in the face of sluggish domestic consumption. As consumers shift their purchasing standards toward practicality and rational spending, it is analyzed that the trend of consumers gravitating toward lower-priced online options will continue. According to the Korean Statistical Information Service, Korea's online penetration rate has increased from 13.2% in 2015 to 40.5% last year.
The offline industry is seeking new avenues through channel diversification, such as selling private brand (PB) products on external online platforms. Emart's PB "Peacock" is sold on Kurly, while Homeplus's PB "Simplus" and Lotte Mart's PB "Good Today" are available on Coupang. Kim's Club, a large supermarket operated by E-Land Retail, is also selling its PB "O'price" products on Coupang and AliExpress.
Plans are also underway to transform large supermarkets into experiential spaces. Emart has converted its stores in Jukjeon, KINTEX, and Dongtan into Starfield Markets. The proportion of traditional grocery items has been reduced, while shopping spaces for food and beverages (F&B), Daiso, Olive Young, and others have expanded. According to Emart, the Starfield Market Jukjeon, which opened in August last year, saw a 39% increase in sales and a 24% increase in visitor numbers in the 10 months following its renewal compared to before the renovation. Similarly, the KINTEX store, which opened in June this year, recorded a 39% increase in sales and a 67% increase in visitors over one month compared to the same period last year.
In a report titled "Survival Strategies for Offline Retail in the Era of Low Growth," Samjong KPMG analyzed that a multifaceted strategy is urgently needed for the survival of the offline industry in this low-growth period. Kim Si-woo, an executive at Samjong KPMG's Retail and Consumer Goods Sector, stated, "We need to actively seek strategies to strengthen core competitiveness through various retail formats, explore new consumer markets, including overseas, and diversify revenue models by entering media businesses."