Monday, April 6, 2015

What gentlemen says and what they thinks

In 2012, in an attempt to “help” small retailers, the Korean government passed the SSM Regulation Law. SSMs refer to “super supermarkets,” which are defined as businesses that are larger than supermarket stores but smaller than hypermarts and with space between 1,000 square meters (300 pyeong) and 3,000 square meters (900 pyeong).

The law forced all large supermarkets and other large discount stores all over Korea to close their doors for business on the second and fourth Sundays of every month. On top of that, the law also limited the super supermarkets' operating hours.

In December 2014, the Seoul High Court overturned the law for several reasons. The most compelling reasons that the court gave were that (1) the law limited consumers' right to choose where to shop and that (2) there was no evidence to suggest that the law actually helped small retailers or traditional markets.

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Politicians were quick to condemn the ruling as they championed public opinion over the rule of law; demagoguery over tempered reason. To make their case, progressive lawmakers were quick to point to a poll that showed that 75.8 percent of the public agreed that super supermarkets ought to be forced to stay closed on the assigned days. Therefore, due to political pressure, although the regulation was overturned by the Seoul High Court, the ordinance still stands.

However, to quote one of my favorite lines from Gone with the Wind, what gentlemen says and what they thinks is two different things. What I am referring to is social desirability bias, which is the tendency for people to give dishonest answers in survey questionnaires because they think certain answers will be viewed more favorably than other types of answers by other people.

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Case in point, according to this article from MK Business News, which was published around the same time the Seoul High Court made its decision, even those who operate small businesses in Korea's traditional markets admitted that forcing super supermarkets to close on every second and fourth Sundays did nothing to improve their sales figures.

While traditional markets continue to languish, however, other sectors are still enjoying huge profits. On Sunday, April 5th 2015, it was reported that sales figures for online stores have overtaken sales figures for hypermarts for the very first time last year.

Yonhap News reported that hypermarts and department stores' sales figures were estimated to be around 46.6 trillion (approximately US$42.4 billion) by the end of 2014. On the other hand, Korean consumers spent approximately 45.3 trillion (approximately US$41.4 billion) in domestic online shopping stores and an additional 1.66 trillion (approximately US$1.5 billion) in international online shopping stores such as Amazon and eBay.

What's more, whereas hypermarts' sales figures for 2014 were 3.4 percent higher than that of 2013, online stores' sales figures were 17.5 percent higher than that of 2013.

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Lawmakers can pass all the laws they want to “protect” small traditional markets by binding large retail stores. They can also cite all the bogus public opinion polls to their collective hearts' content. What will never change, however, is that regardless of what lawmakers do, over time, consumers will always find a way to vote with their wallets.

The only way for traditional markets to survive is for them to revolutionize the way they do business and to find out just what it is that consumers want. Relying on legislation for their financial survival, on the other hand, is the equivalent of commanding the tides not to come in.

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