Last week I spent 3 days in Seoul.
Although I have been to Korea many times, this was my first visit since the COVID pandemic eased.
Seoul was very busy and even though it was November, and hardly peak season, bustling with visitors.
I have done quite a few projects in Korea over the years. It started over 20 years ago when I worked for Nestlé and we were looking at the ice cream market. I’ve since done consulting projects covering Key Account Management, health and beauty supplements, energy drinks and alcohol as well as being a guest speaker at several conferences.
I like Korea. Unfortunately I don’t speak Korean; it would be a pre requisite if I was to spend longer there. English is more widely spoken in business than Japan for example, but not everyone speaks it.
For confidentiality reasons I can’t say too much about what I was doing, I can say it involved meeting convenience store retailers.
Korea’s CVS channel is huge. There are around 46,000 outlets, a number similar to Japan, although Japan is a bigger market (for now!)
GS25 is one of the largest chains, run by the GS group and markets itself under a “lifestyle platform”.
Although most CVS are run by franchisees there are flagship and company owned stores where best practises are tried, tested and rolled out. We spent more time in these.
The stores were similar in size with a floor area between 60-100m2 I’d approximate. All the layouts were pretty similar. Beverages is one of the biggest categories as is snacking and take out food, which is mostly chilled.
Many people think the CVS chains compete only with each other, whilst this is true to a point, the best CVS are looking to take share of spend from fast food and their on the go offerings.
Needless to say all the stores I visited were spotless and well maintained.
The Korean CVS are also knee deep in retail media. One of the chains I met said they had over 680,000 hits on their site, daily!
For brands, CVS is a critical channel to get exposure and visibility.
Is it a profitable channel? Well for many manufacturers probably not as the front margins are high, plus there are listing fees. Logistics costs are also steep. Some brands also pay an extra incentive to franchisees to ensure they order new SKUs.
Like in Japan the stores have next to no storage space so are serviced daily. One of the chains I met had 29 distribution centres.
What role do convenience stores play in your commercial strategy? Are your brands listed in Korea’s convenience stores?