E-Mart24 in bind over acquiring more stores

Asia's Tech News Daily

E-Mart24 in bind over acquiring more stores

A customer purchases a used item at an E-mart24 store in Seoul on Jan. 28. Yonhap

By Kim Jae-heun

E-Mart’s convenience store brand E-Mart24 is in a double bind, where it can neither open stores aggressively due to a government regulation, nor can it acquire other firms to grow in size, because its mother company recently spent 3.8 trillion won to take over both eBay Korea and W Concept.

The convenience store firm said that it will differentiate its stores from others by operating them with unstaffed technology, but this decision too does not look to be enough to help E-Mart24 become one of the top three convenience store brands.

According to the Financial Supervisory Service on Wednesday, GS25 marked 1.92 trillion won ($1.61 billion) in sales in the third quarter of this year to rank No.1 in the local market. CU, operated by BGF Retail, took the No. 2 spot with its sales reaching 1.83 trillion won ($1.53 billion), followed by Seven Eleven in third place with 1.13 trillion won ($949.65 million) in sales. E-Mart24 only logged 517.8 billion won ($435.1 million) in sales.

E-Mart24 is a latecomer that jumped into this market in 2014, when E-Mart acquired the local convenience store brand, “With Me.” It set a goal of opening 6,000 stores and making a profit by 2020. However, the convenience store brand recorded 21.9 billion won ($18.4 million) in operating losses last year. This year, the company is barely saving itself from going into deficit, with a profit of 40 million won ($33,616) as of the third quarter.

What matters the most is the fact that the number of E-Mart24 stores is significantly less than its competitors. GS25 and CU run nearly the same number of around 14,000 stores across the country, as of last December. Seven Eleven owns 10,501 stores. E-Mart24 only has 5,169 stores.

E-Mart24 has to increase its number of stores aggressively in order for it to achieve growth, but the government has set a law under which one cannot open a convenience store where there is another store with a 50 to 100 meters radius. This regulation will be lifted later this year, but the Korea Association of Convenience Store Industry (KACSI) has offered to extend the effective period. Most convenience store operators, including E-Mart24, agreed to follow the KACSI’s stance.

“E-Mart doesn’t have much choice but to agree on extending the regulation because its purpose is to protect franchisers. If it goes against the proposal alone, it will be criticized harshly by the public,” an industry source said.

Acquiring Mini Stop, a convenience store that recently came up for sale in the market, would be another option ― there are 2,607 Mini Stop stores in the country and if E-Mart24 takes it over, it could quickly increase its number of stores to around 8,000 ― but E-Mart24 does not have the capital to do so.

Its mother company is in an even more desperate position to secure funds, as it acquired eBay Korea and W Concept this year. E-Mart also recently sold its headquarters in Seongsu, Seoul, to raise funds.

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