Sep 2025 | 5 min read
Executive Summary
My bespoke field tour across Korea’s retail scene - from hypermarkets to convenience stores - offered a better understanding of the Korean consumers’ habits and highlighted the players that were dominating and capturing wallet share. Here are my key takeaways:
- Consumer sentiment remains subdued, as evidenced by shorter queues at shopping malls and more readily available parking—even on weekends. Conditions may pick up in 2H25, following July’s stimulus measures i.e., the coupon distribution scheme to spur spending.
- Online channels are gaining market share, mirroring global trends. Amid shifting consumer shopping preferences, offline channels in Korea face mounting pressure to differentiate their offerings or consolidate to stay relevant.
- Superior merchandising is becoming increasingly important for all retail players with innovative products gaining popularity. Specifically for offline channels, favourable pricing and comfortable shopping experience play a vital role.
The increasing online penetration is not unique to Korea. With more consumers gravitating online for general merchandise and even food, it is no surprise that the online channel takes up 50% of the overall retail merchandise. The leading online player has experienced accelerating e-commerce market share gain to the tune of 4-5% per annum.
This rise of online retail has not only sparked a grab for the wallet share, but also a grab for talent. Online companies are poaching skilled retail professionals from offline retailers, making it hard for the latter to retain talent. The increased competition from online players have pressured some offline segments to consolidate.
Since 2016, hypermarkets have seen their retail market share decline sharply—from 25% to just 12% by 2024. One of the marts I visited had barely 30-40 people across both floors on a Saturday morning. The main reasons for underperforming hypermarket stores were: (1) poor talent retention (2) low investment into the store refurbishment, and (3) poor inventory turnover.
In the case of convenience stores, overpenetration is resulting in consolidation. There are around 55,000 stores serving 51 million people which is population-to-store ratio of just 937. The street that I was on had three convenience stores within a 100-metre stretch! In contrast, Japan has a similar number of stores but a much larger population of 123 million, resulting in a ratio of 2,207 people per store.
As more of the smaller players close, the market share for convenience stores will likely be concentrated among the top two players.
The number of convenience stores in the area I was in
Ready meal developed in collaboration with Lee Mi-Yeong aka “Lunch Lady” in Culinary Class Wars1
'Membership' Club formats attract higher foot traffic
Given the intense competition, some retailers are tailoring offerings to meet the preferences of Korean consumers. Superior merchandising and curated value are key differentiators for both online and offline retailers in Korea.
a) Customer-centric innovative products
An example is the ready meal that was created in collaboration with chefs from the hit Netflix series ‘Culinary Class Wars’ was a hit with consumers when the show premiered.
b) Curating value via membership club formats
A rising trend in Korea’s retail landscape is the growing popularity of membership club-style formats. These stores offer a minimalist shopping environment with bulk-buy pricing advantages, appealing to value-conscious consumers. Despite having a significantly smaller assortment—around 5,000 stock keeping units (SKUs) compared to the 40,000–50,000 typically found in hypermarkets—I found these clubs to be busier than the hypermarkets. The customer feedback is that they appreciate the curated product selection versus the less targeted offerings of traditional hypermarkets.
In summary, the online consumption trend in Korea is accelerating. This shift has led to a slow bleed of weaker offline peers and a winner-takes-all dynamic. Underperforming formats are closing and stronger players are streamlining with competitive differentiation becoming more critical than ever.
From an investment standpoint, this backdrop favours building positions in leaders with a proven track record in execution. We believe that the market has yet to fully recognise the upside-potential from the ongoing consolidation amongst offline retailers, namely reduced competition, innovative product merchandising and superior cost management. As such we will be on the lookout for retail formats that are underappreciated and positioned for a rebound.
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1 For illustration purpose only
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