E-Mart, a latecomer to the grocery scene, rebuffed the claim that the buyout was part of its plan to multiply SSMs, saying that the deal was proposed by SM Mart.

Not everyone is convinced, however.

“The retailers must have found it difficult to open new stores in the face of the controversy,” said Kim Jin-hyuk, a senior researcher at Samsung Economic Research Institute.

“There will likely be a consistent move toward tougher regulations this year, given the low possibility of a shift in favor of free markets, not the protection of small vendors, ahead of general and presidential elections.”

Meanwhile, Lotte, Shinsegae and Homeplus are also vying to take over Hi-Mart, Korea’s largest electronic appliance retailer with 304 branches nationwide. The company, which debuted on the Seoul bourse in June 2011, is forecast to have earned about 3.5 trillion won ($3.1 billion) in sales and 300 billion won in operating profit.

“If Lotte ends up winning the bid, Hi-Mart will be able to not only accomplish its plan to have 364 stores earlier than the 2018 target, but also open additional ones,” said Park Jong-ryeol, an analyst with HMC Investment & Securities.

The latest expansion plans revived public uproar. Critics lined up on and offline, saying the big retailers are abusing legal loopholes.

“The retail chaebol will soon bring about the apocalypse of neighborhood markets, deteriorate the livelihoods of rank-and-file members of society, and in turn deepen social disparities,” a user wrote on Twitter.

The survival of Korea’s decades-old traditional markets is at stake. Though a few of them still enjoy popularity among local and international visitors for their dynamism and cheap prices, most have already been overtaken by department stores and discount malls.

The number of traditional markets fell from 1,500 in 2003 to 1,322 in 2010. Combined sales plummeted from 36 trillion won to 24 trillion won.

In stark contrast, sales of the country’s top three department store operators ― Lotte, Shinsegae and Hyundai ― shot up nearly 40 percent to 24.3 trillion won during the seven-year period.

Lotte Mart, E-Mart and Homeplus together outstripped traditional markets in sales in 2007. Their collective revenue reached 33.7 trillion won in 2010.

“Many merchants at traditional markets are in their 50s or older. If they lose a means of living, they are likely to wind up passing down the financial burden to their children,” said Kim Young-ki, chief of the commercial district development unit at the Agency for Traditional Market Administration.

To help them compete against bigger rivals, the government and some municipalities crafted measures including mandatory holidays for large retailers, and caps on their business hours.

A multitude of traditional markets, for their part, also undertook large-scale renovations and adopted credit card payment systems to attract more and younger customers.

In Jeonju, North Jeolla Province, the city council revised an ordinance Tuesday that requires discount chains and SSMs to close on the second and fourth Sundays of every month. Other local governments in the region are expected to follow suit.

But some experts say such measures can do little to help treat the root causes of the phenomenon.

There are eight discounters and 18 SSMs in Jeonju. But many of them will likely opt to pay fines rather than comply with the regulation, local officials say, given that weekends account for about 40 percent of their total sales.

“The government should find ways to boost co-prosperity between retail giants and mom-and-pop stores. Merchants also need to improve service quality to better adapt to shifts in consumer trends,“ Kim of the ATMA said.

By Shin Hyon-hee
(heeshin@heraldcorp.com)