E-mart’s revenue for the first three quarters of 2024 reached 12.7 trillion won, marking a 1.8% year-over-year increase. (Image courtesy of E-mart)
SEOUL, Dec. 3 (Korea Bizwire) – Amid years of declining traditional retail sales, warehouse clubs are emerging as bright spots in South Korea’s brick-and-mortar retail landscape. E-mart’s Traders and Costco Korea are bucking the trend of offline retail struggles and inflation-driven consumer caution, primarily through their bulk-sale, low-price business model.
According to data from E-mart released on December 1, the company’s revenue for the first three quarters of 2024 reached 12.7 trillion won, marking a 1.8% year-over-year increase. This recovery is particularly significant following last year’s 2.1% decline, which had marked the company’s first revenue drop in four years.
Traders has been a key driver of this growth, with sales increasing 5.9% to 2.7 trillion won, offsetting a 2.5% decline in E-mart’s main discount store business. Since opening its first location in 2010, Traders has consistently shown strong growth, with its contribution to E-mart’s total revenue expanding from 12.8% in 2018 to 21.3% in the first three quarters of 2023.
Costco Korea, the pioneer of warehouse clubs in the country, has also posted impressive results. Its revenue for fiscal year 2024 (September 2023-August 2024) is projected to reach 6.53 trillion won, up more than 1 trillion won from 5.35 trillion won in 2021. Operating 19 stores in Korea out of its global network of about 890 locations, Costco maintains a membership model charging 38,500 won annually.
The success of these warehouse clubs lies in their distinctive approach to retail. Both Traders and Costco carry significantly fewer items – around 5,000 and 4,000 respectively – compared to traditional retail stores’ 100,000 items. Despite similar or larger floor spaces, they focus on bulk quantities and bundled products, enabling lower per-unit prices.
For example, at Traders, a 30-pack box of Nongshim Shin Ramyun costs 20,280 won, or 676 won per pack, compared to 780 won per pack at traditional retailers. Similarly, Ottogi ketchup and Haepyo cooking oil are sold in multi-packs at 465 won and 341 won per 100ml respectively, significantly lower than traditional retailers’ prices of 696 won and 472 won.
The warehouse clubs also benefit from efficient operations, using retail ready packaging (RRP) that minimizes labor costs. While Costco generates additional revenue through membership fees, Traders has carved out its own niche by offering membership-free shopping.
Industry analysts note that the success of these warehouse clubs has persisted even after COVID-19 restrictions eased and inflation moderated, contrary to earlier predictions. The “bulk-buying and stock-up” shopping behavior that emerged during high inflation periods has become a permanent consumption pattern.
Looking ahead, Traders plans to expand its current network of 21 stores by adding two new locations in Seoul’s Magok and Incheon’s Guwol districts by 2025. An industry insider noted, “Unlike in the past when multiple households would share bulk purchases, now individual households are making their own bulk purchases. Combined with strong private label offerings, warehouse clubs are likely to continue their growth trajectory.”
Ashley Song (ashley@koreabizwire.com)
