Discussions on amending the Distribution Industry Development Act, which has restricted large supermarkets for 14 years, are gaining momentum. With the formation of the 22nd National Assembly's second half and the government's efforts to gather opinions from the distribution sector, there are expectations for accelerated reform. However, strong opposition from small business owners concerned about local market impacts is anticipated during the legislative process.
According to industry sources on July 27, the Ministry of Trade, Industry and Energy recently met with representatives from large supermarkets and the Korea Chain Store Association to discuss strategies for the development of the distribution industry. With the government seeking input, the industry believes discussions on amending the distribution law will gain traction.
Large supermarkets have been constrained by operating hour restrictions. Under the current law, they cannot operate from midnight to 10 a.m. This limitation not only prevents them from opening during these hours but also hinders their ability to package and dispatch goods, effectively blocking their entry into the dawn delivery market.
Meanwhile, consumer spending has shifted from offline to online. According to the Ministry of Trade, Industry and Energy, sales at large supermarkets fell by 5.1% in May compared to the same period last year. In contrast, online retailers like Coupang and Naver now account for nearly 60% of total sales among major distribution companies.
Homeplus's entry into corporate rehabilitation due to financial difficulties has also bolstered calls for regulatory reform. Lawmakers have pointed out that the current regulations, which only target offline stores, do not reflect the changing market environment. In response, the Democratic Party has proposed allowing online deliveries on mandatory closure days and during restricted hours for large supermarkets, considering the increase in dawn delivery users. The People Power Party has suggested abolishing operating hour restrictions and removing the mandatory closure on public holidays twice a month, allowing for adjustments based on local conditions. While there are differences in the scope of regulatory relaxation, both parties agree on the need to amend the current law.
A national research institute has also criticized the regulatory framework as outdated. The Korea Development Institute (KDI) stated in a report last month that the distribution law, designed primarily for large offline stores, has become increasingly disconnected from the current market, where online orders and dawn deliveries are commonplace.
However, small business associations are pushing back, arguing that easing regulations would threaten the survival of local markets. The Korea Supermarket Cooperative Federation recently issued a statement claiming that relaxing operating hour restrictions for large supermarkets is a policy that ignores the needs of small supermarkets and local businesses. They warned that in the current environment of high inflation and interest rates, lifting regulations on large supermarkets would cause irreparable harm to small neighborhood businesses, emphasizing the need for protective measures for local markets first.
Some voices are calling for a reassessment of the regulatory balance across all distribution channels, both online and offline. KDI researcher Lee Gong stated, "Discussions on legal amendments should ensure regulatory equity between online and offline channels to prevent undue burdens on one side. Furthermore, as Chinese e-commerce platforms like Temu and AliExpress establish dawn and same-day delivery logistics in South Korea, monitoring their impact on offline retailers' sales is crucial, and policies should be flexibly adapted accordingly."
* This article has been translated by AI.
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