Thirteen years have elapsed since South Korea implemented a mandatory closure system for large-scale retailers, primarily hypermarkets and supermarkets, with the noble intention of shielding and invigorating its traditional markets. However, a recent rigorous analysis conducted by the Korea Economic Research Institute (KERI) casts a pall over the efficacy of this long-standing policy. The findings, derived from an in-depth examination of consumer purchase data sourced from the Rural Development Administration's consumer panel, starkly reveal that the intended surge in consumer spending at traditional markets on days when their larger counterparts shutter their doors has simply not materialized. This revelation prompts a critical reassessment of a policy that has become a contentious issue in South Korea's retail landscape.

The KERI study, meticulously analyzing purchasing patterns up to 2022 – the year preceding the introduction of weekday mandatory closures – paints a concerning picture for proponents of the current regulatory framework. Focusing on weekend grocery expenditures, the data unveils a counterintuitive trend. On Sundays in 2022, days when large supermarkets were mandated to close, the average grocery expenditure in traditional markets stood at 6.1 million Korean won. Intriguingly, this figure was actually lower than the 6.3 million Korean won recorded on Sundays when these large retailers operated without restrictions. This marginal difference, far from indicating a significant shift in consumer behavior towards traditional markets during mandatory closures, suggests a stagnation or even a slight detriment to their economic activity on these ostensibly protected days.

A longitudinal comparison of average grocery purchases on mandatory closure days between 2015 and 2022 further underscores the policy's underwhelming impact. Over this seven-year period, while large supermarkets faced mandated closures, traditional markets witnessed a significant 55% decline in average grocery purchase amounts. Concurrently, a seismic shift occurred in the digital realm, with online shopping platforms experiencing an exponential surge in grocery purchases, exceeding a twenty-fold increase. This dramatic pivot towards online retailers suggests that consumers, rather than flocking to traditional markets during the forced inactivity of large supermarkets, are increasingly embracing the convenience and accessibility of e-commerce for their grocery needs. Furthermore, the study highlights a broader contraction in offline grocery spending across all major retail formats – large supermarkets, traditional markets, and smaller supermarkets – between 2015 and 2022, indicating a systemic change in consumer behavior rather than a simple redistribution of spending among traditional brick-and-mortar options.

The Korea Economic Research Institute's report also astutely draws attention to the international rarity of such stringent mandatory closure policies. While the intent behind the legislation – to protect smaller, independent retailers from the overwhelming competitive pressure of large chains – is understandable, the global experience offers cautionary tales. Japan, for instance, implemented similar regulations on the operating hours of large-scale retailers in 1973, driven by a comparable policy objective of safeguarding small local businesses. However, these restrictions ultimately led to significant consumer inconvenience and a noticeable downturn in the overall retail sector. Faced with these adverse consequences, Japan ultimately repealed its large-scale retail operating hour regulations in 2000, recognizing the need for a more balanced and consumer-centric approach to retail competition. This historical precedent underscores the potential pitfalls of protectionist measures that may inadvertently harm the broader economy and inconvenience consumers without achieving their intended goals.

Yoo Min-hee, a perceptive research fellow at KERI, cogently argues that the persistent lack of demonstrable positive impact from the mandatory closure policy necessitates a fundamental re-evaluation of its efficacy. "If the mandatory closure policy continues to yield minimal positive results for traditional markets after over a decade of implementation, it is imperative that policymakers undertake a bold reassessment, considering either significant reforms to the existing system or the exploration of entirely new and more effective alternatives," stated Yoo. She further emphasized the urgent need to cultivate a dynamic and sustainable retail ecosystem where diverse formats – online platforms, large supermarkets, and traditional markets – can coexist and thrive. This necessitates a paradigm shift away from purely protectionist measures towards strategies that enhance the competitiveness and appeal of traditional markets in their own right, such as modernization initiatives, improved infrastructure, unique product offerings, and enhanced customer service.

The debate surrounding the mandatory closure system in South Korea is multifaceted and deeply entrenched. Proponents of the policy often argue that it provides a crucial breathing space for traditional markets, allowing them to compete more effectively against the sheer scale and resources of large retailers. They contend that without such regulations, traditional markets, often the heart of local communities and repositories of cultural heritage, would inevitably wither and disappear, leading to a homogenization of the retail landscape and a loss of social fabric. Furthermore, some argue that the policy promotes a more equitable distribution of economic activity and supports the livelihoods of small business owners who form the backbone of traditional markets.

However, the data presented by KERI and the international experience, particularly the case of Japan, suggest that the benefits of mandatory closures may be overstated, while the costs in terms of consumer convenience and potential economic inefficiencies may be significant. Modern consumers increasingly value convenience, choice, and competitive pricing, factors where large retailers and online platforms often hold a distinct advantage. Forcing consumers to alter their shopping habits may not necessarily redirect their spending to traditional markets but rather towards more accessible alternatives, such as online retailers or smaller supermarkets that are exempt from the mandatory closure regulations.

Moving forward, a more nuanced and comprehensive approach may be required to genuinely revitalize South Korea's traditional markets. Rather than relying solely on restrictive measures that limit the operational capacity of large retailers, policymakers could explore strategies that focus on enhancing the inherent strengths and unique characteristics of traditional markets. This could include investments in infrastructure improvements, such as modernizing facilities, improving hygiene standards, and enhancing accessibility. Promoting the development of unique local products and culinary specialties that cannot be found in large retailers or online platforms could also attract consumers seeking differentiated offerings. Furthermore, initiatives to improve marketing and branding efforts, leverage digital technologies for sales and customer engagement, and foster a more vibrant and community-oriented shopping experience could help traditional markets adapt to the evolving retail landscape and carve out a sustainable niche.

In conclusion, while the intention behind South Korea's mandatory closure policy for large retailers was undoubtedly to protect and bolster traditional markets, the evidence over the past thirteen years suggests that its effectiveness has been limited at best. The KERI analysis provides compelling data indicating that consumer spending has not significantly shifted towards traditional markets on mandatory closure days, with online platforms emerging as the primary beneficiaries. As South Korea navigates the complexities of a rapidly transforming retail environment, a critical and open-minded reassessment of existing policies, coupled with a focus on empowering traditional markets through modernization and differentiation, will be crucial to fostering a balanced and thriving retail ecosystem that serves the needs of both consumers and small businesses. The time for bold alternatives and a holistic vision for the future of South Korean retail is now.