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ISSN : 2233-4165(Print)
ISSN : 2233-5382(Online)
International Journal of Industrial Distribution & Business Vol.8 No.1 pp.15-22
DOI : 10.13106/ijidb.2017.vol8.no1.15.

The Growth Strategy of Retail Companies: Focusing on New Stores Expansion of E-mart

Gi-Hwang Lee*, Sang-Cheol Kim**
*First Author, University of Marketing and Distribution Sciences, Japan. Tel: +81-78-794-3557, E-mail:
**Corresponding Author, Yuhan University, Korea. Tel: +82-2-9940-4921. E-mail:
February 3, 2017 March 3, 2017 March 15, 2017

Abstract

Purpose – Retail companies are turning from one type of retailer to multiple business categories through various reasons, such as taking advantage of existed types of retailers’ channel distribution, information and know-how, and entering into new types of retailers. However, there is few research conducted about multiple type of retailers.
Research design, data, and methodology – In this research, the references, data and new stores on E-mart will be collected. The dissertation, annual report, statistical data, land-book of E-mart will be also collected to confirm whether E-mart has made any acquisition towards another company.
Results – There is a tendency to new stores expansion, store enlargement and prolonging the opening preparation of new stores, based on the core of new stores expansion of E-mart as a general supermarket type of retailers. Based on general supermarket type of retailers, E-mart begins to diversify its retail company’s type of retailers.
Conclusions – As a general supermarket which is the most important type of retailers, E-mart is expanding into SSM type of retailers to seek new power of growth while slowdown growth is shown in general supermarket type of retailers. The expansion into SSM type of retailers would be a wise option as a retail company, E-mart is able to keep growing in the future.

초록


1. Introduction

So far, most subjects of the company’s growth theory are manufacture companies. It is obvious that the existence of retail companies should be considered as the subject of the company’s growth theory as well. However, normally manufacturer is the company which manufactures products and retailer is the company which sells products. Due to this difference, the factors that influence the growth theory of a manufacture company and a retail company should be different.

On the other side, the key of a manufacture company to improve their competitiveness is by continuously developing new products. Certainly, developing new products is not the only way to improve competitiveness, but it is the core. However, a retail company does not produce new products. Although retail company has private brand products, they can`t be defined as the new products since retail company commissions the manufacture company to produce those products with lower cost. Therefore, for a retail company what they are supposed to do is to evolve and develop the way of selling instead of the products themselves. Various business categories, such as the department store, specialty store, shopping center, convenient store, supermarket, are appearing. The competitiveness of retail companies are getting improved by changing the service, price and quality provided to consumers and by developing the way of purchase according to consumers’ desires.

Therefore, this research will be analyzed from the view of the competitive power and growth of retail companies and new stores expansion.

2. Methodology

The case that will be used in this research is the Korean company called E-mart. There are five reasons for choosing this company. First, the first store of E-mart was built in 1993, and the company history is more than 20 years. Secondly, E-mart is growing steadily and has a high share of the market. Thirdly, the majority of its business categories and its type of retailers diversification makes E-mart a proper case of this research. Fourthly, the E-mart stores are expanding all over Korea. Finally, due to its listed stock, the information and documents of E-mart are easily collected.

There is a tendency of new stores expansion, store enlargement and prolonging the opening preparation of new stores, based on the core of new stores expansion of E-mart as a general supermarket type of retailers. Based on general supermarket type of retailers, E-mart begins to diversify its retail company’s type of retailers. Among the type of retailers, Super Supermarket (SSM) is the most representative type of retailers. In this SSM type of retailers, the products of general supermarket are brought together mainly based on food products. The numbers of stores are being reduced so that the general supermarket is able to enter smaller business region. Since 2010, this kind of new stores has been expanding widely and quickly. Besides, type of retailers such as warehouse discount store, drug store and convenience store are actively expanding.

3. Results

3.1. The change of type of retailers classified by several E-mart stores.

According to <Figure 1>, the number of general supermarkets has exploded since 1997, and in 2006 the expansion became outstanding. However, the number decreased rapidly after 2012.

<Figure 1> The new store expansion of general supermarket, Department Store and SSM

Based on the factors that influence new store expansion, due to “The Distribution Industry Development Act”, a large scale store can directly open up its own store which could not be done before, and this leads to the boom of new stores expansion since 1997. Therefore, not only E-mart, large scale retail companies inside and outside Korea began to compete for expanding new stores. In 2006, because of such boom of new stores expansions, the American Wal-Mart can no longer survive in the market of retail companies in Korea and finally they announced its withdrawal from Korea. E-mart took over 19 stores of Wal-Mart and opened up another 4 new stores in 2006. In 2012, the decrease of new stores expansion of general supermarket and the rapid increase of SSM made it difficult for general supermarket to expand new stores and at the same time, with the competitiveness among general supermarket, Department Store and SSM, the building space of general supermarket also became saturated.

On the other side, the resources for general supermarket are successfully reused by SSM. In the process of searching for the new growth power, the general supermarket has the ability to expand in small business regions. Due to the similarity of selling method and assortment with general supermarket, to E-mart and other general supermarket, they can easily expand new stores. Thus, a rapid increase of general supermarket expansion appeared. Based on these reasons, new stores of SSM have expanded rapidly.

3.2. Type of General Supermarket

In the land-book, statistical data, and financial report of 155 E-marts general supermarket, the business start time, area space, transaction object and change of type of retailers of each store are collected. 113 stores’, from the 155 stores, acquisition date has been confirmed and 42 of them are still unknown.

<Table 1> The Ownership of General Supermarket

The column of own/rental shows that part of the stores would be owned and part of them would be considered as rental. “Own after rental” means that among those 113 stores whose date acquisition have already been confirmed, there are stores being taken over after opening up and stores being considered to be taken over after paying off the rental fee. The number of “Own after rental” is 11 and 7 of them are taken over by government. Besides, 27 of 113 date acquisition confirmed stores are also taken over by government(See Table 1).

3.3. The change of the area of General Supermarket

The <Table 2> above is showing the average area of new stores concerned by years. The area data is not only about the selling space but also covering the space of parking lot and service institution. As time passes by, the scale gradually became larger.

<Table 2> The average area of E-mart’s General Supermarket

3.4. The period of arranging new stores of General Supermarket

The period from acquisition date to opening date of each store are shown in <Table 3> below. Since 11 of 113 stores whose acquisition date have been confirmed are recorded before business time in 1995 and 16 of them are taken over from Wal-Mart, this table is created based on the data of 85 stores left. The reason of removing those 11 stores is that the rental date of them cannot be confirmed.

<Table 3> The average period between the acquisition dates of E-mart’s General Supermarket and the day of opening

The change of license system for establishment of general institution and the expansion of Korean retail companies were determined in succession since 1996. It becomes easy for new stores to expand. The assurance of good location and new store expansion also became the priority to major retail company in the future competition. <Table 3> above shows the time period from the land purchased by E-mart to the arrangement of refurbishing new stores.

3.5. The movement of each type of retailers’ sales

<Figure 2> is the transition of sales of E-mart’s each type of retailers concerned by years. According to <Figure 2>, the reason that E-mart’s type of retailers is excluding online shopping mall, drug store and convenience store is the sale of online shopping mall is included in general supermarket and drug store, convenience store have just begun.

<Figure 2> Sales of E-mart’s each type of retailers

There are three main points that can be understood from  E-mart. First of all, from 1996 to 2012 the general supermarket’s sales kept increasing and never dropped even once. Secondly, even the regulation for general supermarket has become stricter after 2012; the sales of general supermarket did not decrease at all. Thirdly, the store number and sales of SSM’s were still increasing. Clearly, when looking at the data back and forth of Lehman Shock in 2008, E-mart’s ability to measure financial risk can be told somehow. Due to the Distribution Industry Development Act, the business regulation of general stores became stricter and the growth of sales stopped since 2012. From this point, general supermarket can be defined as entering maturity stage and the decrease in sales might be predicted as time goes by.

However, the type of retailers should not be the only thing to be focused on. E-mart will continue to grow by considering the growth of SSM and the entire retail companies. Besides, SSM is classified as semi general store and the object of business regulation. In order to seek the new power of growth for type of retailers such as convenience store and drug store, the type of retailers should be diversified.

4. Discussion and Conclusions

4.1. Conclusions and Implications

There five important points in this research. Firstly, the new stores that opened up recently are getting larger and larger. Comparing with the previous new stores, nowadays the area of new stores is about 1.5 larger.

Secondly, the percentage of new stores with 100% ownership is significantly high with about 86%. The percentage of new stores with more than 50% ownership is 91%.

Thirdly, when managing only one type of retailers, it is easy for retail companies to expand into a similar type of retailers. E-mart was expanding with more than 100 SSM new stores from 2011 to 2012. The retail company has an advantage in expanding into type of retailers for another  retail company, since E-mart is able to expand its new stores massively and rapidly in short period.

Fourthly, the period of expanding stores is rising. There is a claim that, due to the prediction of the reuse of department store’s good location and building, E-mart is expanding most rapidly among the general supermarkets. But, the average arrangement period of expanding new stores is 9 months during the period of major retail companies expanding general supermarket in earnest from 1996 to 2000. This result is against the insistence which the period of prediction is too short.

Lastly, expanding into SSM is as the same time as a slowdown in sales growth of general supermarket appears. It is same as a manufacture company expanding from its decline products to new products with a potential to grow.

4.2. Limitations and Recommendations for Future Research

The limitation of this research is that there is only one company analyzed as a case and internal interaction has not been revealed when a company is expanding into a new type of retailer. Especially, the internal interaction of multiple types of business has been not revealed yet, which also will be made as an assignment in the future.

In addition, when targeting retail companies that have multiple types of business, how the different type of retailers corporate with each other inside the same company will be an important assignment as well.

Appendix

<Appendix> is the data for the general supermarket of E-mart until September 2015. It is listed on the basis of the opening date, and none of the stores are closed(There is one store relocation).

The date of the acquisition was recorded on the register of the toji and a certified copy of the register, and date of the acquisition of 113 are confirmed, and 42 are not confirmed. A store where the date of the acquisition was not confirmed was marked blank.

At the list, [Form of possession] is the data about ownership or rental a store. This item is divided into four categories. Of these, [ownership/rental] owns part of the store. [rental after ownership] is a store that opened faster than the day of the acquisition, and it is assumed that it would purchased after the opening of the store.

The store with store name (T) is called E-Mart Traders, and the store with (M) means E-mart Metro.

 

Figure

Table

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