In 2021, warehouse clubs maintained strong double-digit current value growth in contrast to many other store-based retailers that struggled to recover from the losses caused by reduced footfall since early 2020. Due to the continued social distancing measures, local consumers have spent greater time at home than usual and reduced their visits to crowded shopping centres, leading to bulk purchases of grocery items.
While Costco had not opened a new outlet in South Korea over the last three years of the review period, the warehouse club’s expansion across the country is being planned, as South Korea has proven to be an attractive market. The rising demand for imported goods sold at low prices, such as Costco’s private label line Kirkland Signature, has supported its healthy sales growth despite the spread of the pandemic, solidifying confidence in the South Korean market once again.
E-Mart Traders, the second biggest name in warehouse clubs, is aggressively making strides by expanding its private label offers and strengthening its fresh food aisle. For instance, T Standard and THE series, recently-launched private label lines for groceries and consumer appliances, are gaining in popularity amongst local consumers searching for value for money.
The cost of living in South Korea has risen faster than wages over the past decade, while the growth of the country’s economy has slowed down. On the other hand, displaying luxury items and affluent lifestyles on social media platforms has become part of mainstream culture in South Korea, motivating consumers to spend on luxury goods, travel, and hobbies.
Although accelerated digitalisation has heavily affected South Korea’s retail landscape, warehouse clubs have potential for further growth as players invest to become more than just a shopping destination. For instance, Lotte’s Vic Market accepted BMW Service Fast Lane as a tenant at one of its outlets in Seoul, making the most of the store’s prime location in the centre of Seoul and encouraging customers to shop at Vic Market while waiting for their vehicles to be repaired.
In 2020, Lotte Shopping closed three Vic Market outlets as part of the company’s restructuring plan for store-based retailing business. Compared to Costco and E-Mart Traders, the two leading warehouse club banners, Vic Market had shown a sluggish performance, resulting in the bold decision to close most of its outlets.
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Warehouse clubs are chained outlets that sell a wide variety of merchandise, typically situated in out-of-town locations, with a selling space of over 2,500 sq metres (and invariably over 4,000 sq metres in total size). Customers have to pay an annual membership fee in order to shop. The clubs are able to keep prices low due to the no-frills format of the stores and large volume SKUs. Example brands include Costco, Sam’s Club (Walmart), and Atacadão. Excludes sales attributable to membership fees and business-to-business sales. Also excludes cash & carry and wholesale outlets (which are typically oriented towards businesses, rather than consumers). Note: Local variants, such as atacarejos in Brazil, are included in this channel.
See All of Our DefinitionsThis report originates from Passport, our Warehouse Clubs research and analysis database.
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