The debate over the Distribution Industry Development Act is resurfacing. As criticism mounts that restrictions on big-box store hours and mandatory closing days do not fit a retail landscape that has reorganized around online, discussions on easing regulations, including allowing dawn delivery, are gathering pace. This series examines the market changes brought by the Distribution Industry Development Act and their flip side, and seeks the direction of regulation and win-win solutions suited to the changed retail environment. [Editor's note]
Discussions are underway on changes to retail policy. The Distribution Industry Development Act (hereafter DID Act), which for more than 10 years has focused on regulating big-box stores, faces the possibility of deregulation with the emergence of the e-commerce giant Coupang as a new variable. Experts said that this time, rather than political logic, the law should be revised by looking squarely at the industry and considering the welfare of the majority of consumers over vote counts.
◇ "Law revisions should focus on industrial revitalization and win-win cooperation"
"We should not embark on abstract law revisions filled only with feel-good rhetoric."
This was the common refrain on the 18th from retail industry and academic figures regarding revisions to the DID Act. They assessed that because regulations over the past 10 years were abstract, they did not function properly. Although, in the name of win-win cooperation and protecting small merchants, discussions since 2013 centered on strengthening regulations on big-box stores operated by large companies, the outcome was the unchecked lead of the e-commerce player Coupang.
The DID Act was led by the ruling Democratic Party of Korea. With local elections coming up in Jun., experts said the discussion should not again be swayed by political logic.
There was also advice to look at the numbers. Various studies have found that when a big-box store closes, spending in nearby commercial districts actually weakens. Based on Seoul's large-store permitting data, the Bank of Korea analyzed the commercial areas around Lotte Mart Dobong and Guro, which closed in Nov. and Dec. 2020, and tallied that the closures reduced sales within a 2-kilometer radius by about 5.3%. Weekday and weekend sales also fell by about 5.0% and 7.8%, respectively.
Academia said the time has passed for viewing the industry by dividing it into large companies and small merchants. Gu Jin-gyeong, head of the New Growth Engines Research Office at the Korea Institute for Industrial Economics & Trade (KIET), said, "Today's DID Act is, based on the 2013 revision, focused on regulating offline marts. It does not reflect at all the transformation of the consumer market to digital or the intensifying global retail competition," adding, "The DID Act, which is rooted in past offline-focused regulation, needs a fundamental overhaul."
◇ "Easing regulations across offline retail is necessary"
Experts agreed that policies to promote the entire offline retail sector—encompassing big-box stores, small merchants, and traditional markets—need to be introduced. The key is to create an environment that draws consumers back to offline venues.
Jeong Yeon-seung, professor at Dankook University College of Business and Economics, said, "In the past, because online shopping was not mainstream, the impact of big-box stores on neighborhood commercial districts was highlighted, but the situation is now completely different," adding, "We should remove regulatory disparities between online and offline in line with the changed consumption trends."
Lee Jong-woo, professor in the Department of Business Administration at Ajou University, said, "A decade ago, big-box stores were the center of distribution, but now online shopping (e-commerce) is leading," adding, "We should not allow a 'tilted playing field' where regulation grows only e-commerce rather than protecting small merchants."
Currently, discussions are underway to partially ease restrictions on big-box store operating hours, but there is also a consensus that the mandatory closing day regulation should be revisited. For restoring offline competitiveness, partial adjustments alone have limits.
Kim Dae-jong, professor in the School of Business Administration at Sejong University, said, "Allowing weekend operations, when consumer visits concentrate, is important," adding, "Only when family-unit consumers can extend their trips around big-box stores to dining and cultural activities will the tilted playing field between online and offline retail finally level out and the overall competitiveness of offline retail recover."
Lee Eun-hee, emeritus professor in the Department of Consumer Studies at Inha University, said, "There is no need to view easing mandatory closing days simply as support for big-box stores," adding, "It is positive in that it can first draw consumers outside." She added, "Many small merchants and small and midsize partners still remain within the offline retail ecosystem."
However, some said that separate support measures for small merchants should accompany the deregulation process. Deputy Minister Gu added, "Some small retailers may be hit as regulations are eased," and "Beyond simple operating-hour or geographic separation, industry-level support measures that can substantively strengthen competitiveness should be reviewed together."