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Photo = Yonhap news |
[Alpha Biz= Kim Sangjin] Costco is maintaining its growth momentum while traditional retailers like hypermarkets and department stores face stagnation. This trend is especially evident as Homeplus, which has been struggling with continuous store closures and mounting losses, is now at risk of losing its position as the second-largest retailer to Costco.
According to Costco Korea's audit report on Sunday, sales for the fiscal year from September 2023 to August 2024 reached 6.53 trillion KRW, a 7.6% increase from the previous year. This has led to a shift in the rankings of South Korea's major retailers. The sales gap between Homeplus and Costco was over 2.5 trillion KRW in 2020. However, Costco has consistently grown at an annual rate of nearly 10%, narrowing the gap to approximately 400 billion KRW this year.
Warehouse-type discount stores like Costco and E-Mart Traders sell large-volume products in bulk or box sets. Their "high-volume, low-margin" strategy reduces purchasing costs and minimizes labor for product displays, while appealing to consumers seeking value for money amid economic downturns.
A survey by Trend Monitor on large-volume (bulk) vs. small-package food consumption in 2024 revealed that 86.5% of consumers had purchased large-volume products, with 64.4% of them preferring products that are "cheap for large quantities," a 2.2% increase from last year. Costco's largest store, located in Yangjae, has become so popular that customers need to arrive at the opening time of 8 AM on weekends to get in. Many consumers also reduce costs by splitting membership fees among multiple households.
Costco's growth is especially notable when compared to other retail channels. According to Meritz Securities, the growth rate of Costco's visitor traffic for the four weeks leading up to the 22nd of the month was 11.1% year-on-year. In contrast, E-Mart saw a 17% decrease, while Lotte Hi-Mart and Homeplus experienced declines of 1.1% and 4.5%, respectively. Lotte Shopping, Shinsegae, and Hyundai Department Store all reported declines ranging from 2.6% to 15.3%, indicating a general contraction in the retail sector.
Meanwhile, Homeplus is facing significant challenges, with a steady decline in store numbers. The number of stores dropped from 140 in 2019 to 129 by the third quarter of this year, and an additional 11 stores are expected to close soon. Despite ongoing store closures, Homeplus has posted three consecutive years of losses. Recently, the company initiated voluntary retirement applications for employees in the Busan, Ulsan, and Gyeongnam regions.
MBK Partners, which acquired Homeplus 10 years ago, is still struggling to recover its investment. Korean Credit Rating Agency downgraded Homeplus’s unsecured bond outlook from “Stable” to “Negative” last year. In June, MBK Partners announced plans to sell Homeplus Express, but it has been unable to find a buyer, delaying the sale.
Alphabiz Reporter Kim SangJin(letyou@alphabiz.co.kr)
