Sales at Korea’s convenience stores have enjoyed a 20% Cagr over the past five years. While the market is concerned about the future buildout potential, we believe it is “game on” for the leading players which should continue to enjoy improving margins and sales over the next five years, thanks to store expansions and same-store-sales growth.
Big renewal cycle just beginning
Korean convenience stores (CVSs) have the highest penetration rate in the world, but there is still strong demand, due to rising unemployment, large numbers of small businesses closing, and baby boomers reaching retirement age. We expect the number of convenience stores to enjoy 3% organic growth. Following aggressive expansion since 2014, a big renewal cycle has just begun, as many contracts reach the end of their five-year terms. We expect gradual market consolidation.
Beneficiary of ecommerce expansion
Despite the rapid rise of Coupang, Korea’s biggest ecommerce retailer, people still use hyper/supermarkets for their grocery shopping. However, many offline and online retailers have launched their own versions of fresh-food delivery services. As a result, there is less incentive than ever for people to visit large retail outlets. Considering that ecommerce is subject to strict liquor-sale restrictions, demand has shifted to other offline channels. We believe that convenience stores will take market share to drive SSS (same-store sales) growth across the industry.
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