Retail law revision tests reform balance

The Distribution Industry Development Act, enacted in 2012, is poised for a partial revision after 14 years. The ruling party, the government and the presidential office have agreed to permit large discount stores to offer dawn delivery services, and the ruling Democratic Party of Korea has introduced an amendment reflecting that consensus. At roughly the same time, the main opposition People Power Party put forward a similar bill.

The law was originally passed to protect traditional markets and small merchants from competition by large discount chains and corporate supermarkets. Over time, however, provisions such as mandatory closures twice a month, restrictions on operating hours from midnight to 10 a.m., and limits on opening new stores within a 1-kilometer radius of traditional markets have drawn criticism as excessive. Opponents argue that heavy regulation has constrained corporate activity while failing to meaningfully revive traditional markets. Above all, the rules have not met consumer demand for round-the-clock shopping convenience.

Over the past 14 years, the rapid expansion of e-commerce, led by retail giant Coupang, has fundamentally reshaped the industry. According to a Ministry of Trade, Industry and Energy analysis of sales at major retailers from 2021 to 2025, revenue at online platforms such as Coupang rose by an average of 10.1 percent annually, while sales at large discount stores declined by 4.2 percent. Homeplus, once a leading big-box retailer, now faces severe financial strain. Efforts to reinvigorate traditional markets have also produced limited results. As retail activity has shifted rapidly from offline to online channels, the number of traditional markets fell from 1,511 in 2012 to 1,393 in 2023.

Large discount chains have waited more than a decade for revisions that would allow fairer competition with Coupang. Although deregulation now appears closer, uncertainties remain. Companies view policy unpredictability as a significant risk. An industry official welcomed efforts to amend the law but questioned whether policymakers can navigate the complex political and regulatory obstacles ahead. It is also unclear what conditions may be attached to approval of dawn delivery services. Proposals under discussion include profit-sharing arrangements tied to dawn delivery or mandatory contributions by large retailers to coexistence and cooperation funds.

Small business owners are voicing strong opposition. The Korea Federation of Micro Enterprises has said that while it recognizes the existing dawn delivery ecosystem, it cannot accept the entry of large conglomerates into the sector. The organization has put up protest banners in markets nationwide.

Labor groups are another key variable. The civic group People’s Solidarity for Participatory Democracy and the Korean Confederation of Trade Unions have gone beyond opposing the participation of large retailers, arguing that dawn delivery services offered by e-commerce platforms such as Coupang should themselves face tighter restrictions. Established online retailers, including Kurly and Oasis, are also assessing how the entry of new competitors could affect the market.

The government and political parties expect substantive debate on the amendment to begin in the second quarter. Given the wide gaps among stakeholders, considerable friction appears inevitable. Even so, revision of the Distribution Industry Development Act should not be delayed indefinitely. For large retailers to enter the dawn delivery market, they would need to invest in packaging systems, recruit additional delivery personnel and build supporting infrastructure. Extended policy uncertainty would only increase those burdens.

Notably, both the ruling and opposition parties have reached broad agreement on easing dawn delivery regulations through amendments to the law. The National Assembly, which is responsible for reconciling competing interests, must carry out that role. With each stakeholder prepared to make concessions, the legislation should be revised in a timely and balanced manner.