Structural Changes in Food Retailing : Six Country Case Studies

The authors thank Kate Hook for her editorial assistance. Any mistakes are those of the authors. Comments are encouraged. All views, interpretations, recommendations, and conclusions expressed in this document are those of the authors and not necessarily those of the supporting or cooperating organizations. Readers may make verbatim copies of this document for noncommercial purposes by any means, provided that this copyright notice appears on all such copies. 1. INTRODUCTION Historically a large number of small-scale food retailers have dominated the Korean food retail industry. Food items were mainly sold through small-scale grocery stores, " mom and pop " stores, and traditional market places. However, the importance of small-scale food retailers decreased sharply as Western-style supermarkets and discount stores were introduced. The development of large-scale retail chains came in part from Korean companies and in part from foreign food retailers, such as Carrefour, Wal-Mart, and Tesco. For the most part, these global retailers entered the Korean market with discount store formats. The changes in food retailing occurred so fast and with so much influence on the economy, and that is often called the " distribution revolution " in Korea. Available evidence indicates that changes in food retailing have significantly influenced consumers, producers, and the overall food marketing system. Development of large-scale retailers with supermarket or discount store formats has generated scale economies and streamlined procurement practices leading to increased consumer welfare via lower prices and improved quality. The more efficient marketing channels have also led to ancillary benefits to those upstream suppliers able to adapt to the large retail procurement format. However, as the market shares of major supermarket and discount store chains have increased sharply in recent years, there has been a growing concern for the buying power exercised by large food retailers. All supermarkets now account for 54% of all food store sales in Korea, and the largest four firms hold 43% of supermarket sales. While this is still low in comparison to many developed nations, it is changing rapidly. Given the revolutionary changes occurring in food retailing, it is helpful to examine the nature of these changes and their impact on food producers and consumers. The experiences in Korea may provide useful insights into food retailing sector in other countries, especially developing countries. The following section contains a thorough discussion and assessment of the recent structural changes in food retailing. Section three identifies and summarizes the effects …