Research project finds raise in cost to consumers in food, clothing
A government-commissioned research report found that hypermarkets, or large-scale discount department stores, may not bring down consumer prices and create new jobs.
The research, commissioned by the Small and Medium Business Administration (SMBA), found that hypermarkets have caused consumer prices to rise in a city or a province, and have actually failed to create new jobs, as many small retailers have had to close their shops due to competition from newly opened hypermarkets.
The research, conducted by a team led by Namseoul University professor Won Jong-mun between 1999 and 2003, is seen as the first numerical report on the impact of hypermarkets on the local economy.
Rep. Jo Jeong-sik of the ruling Uri Party disclosed the research at a parliamentary audit for SMBA on October 30.
The research analyzed that a 10-percent rise in the presence of hypermarkets caused a 0.37 percent increase in overall consumer prices in a city or province.
As for goods prices, a 10 percent increase in the presence of hypermarkets caused a 0.28 percent rise in agricultural prices, a 0.42 percent rise in food prices, a 0.16 percent rise in furniture and kitchenware prices, and a 0.39 percent rise in the cost of clothing and shoes. The results sharply contrasted with the conventional perception that hypermarkets could cause prices to fall by cutting costs via efficient logistics systems and stronger purchasing power by the huge conglomerates, which should provide lower-cost products to consumers. Hypermarkets were also found to pose a negative impact on job creation. Last year, newly launched hypermarkets hired about 18,800 people, but some 22,800 jobs disappeared because of falling sales in small- and medium-sized retailers. The hypermarket industry has argued that a hypermarket has a net employment effect of 500 to 700 people, but these figures fail to fully account for the rise in the unemployement rate from the fall of small- and medium-sized retailers, according to the study. The size of hypermarkets rose at an average annual growth rate of 12.4 percent between 1999 and 2003. Alongside this growth, small- and medium-sized retailers saw sales reduced by 2.2 trillion won (US$2.5 billion), the research said. "The research is meaningful because it specifically assessed the societal cost of hypermarkets," said Prof. Won.
