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(Yonhap Feature) Convenience stores in midst of evolution by diversifying services

All Headlines 09:00 March 03, 2017

By Park Sang-soo

SEOUL, March 3 (Yonhap) -- Kim So-yul, a 20-something office worker, is a Starbucks fan but sometimes buys freshly brewed coffee at 7-Eleven, a convenience store chain, during lunchtime.

When she has spare time, she goes upstairs to the second story of the convenience store in downtown Seoul and watches the outside world through the window, sitting in a cushioned chair.

"Although we can't see a skilled barista, the affordable price here is important to me," Kim said. "But the taste is good for that price," she said, adding that the second floor here is really nice because it offers an airy and warm atmosphere to customers just like in a cafe with tables, soft chairs, and long wooden tables.

The convenience store becomes a hangout for budget-conscious office workers and passers-by as the shop provides brewed coffee at prices ranging from 1,000 won to 1,800 won (US$0.87 to US$1.57) depending on cup sizes and whether it is hot or iced. Customers are also able to enjoy "dosirak," or Korean lunch boxes.

7-Eleven's Seven Cafe in downtown Seoul is crowded with customers during the daytime. (photo courtesy of 7-Eleven) (Yonhap)

The Seven-Cafe, run by 7-Eleven, underscores local convenience store chains' efforts to get access to a wide range of customers who constantly search for differentiated services at affordable costs amid fierce competition.

It is not only cheap, even cheaper than typical canned coffee, but also considered drinkable compared with instant coffee sold in vending machines. Plus, convenience stores are everywhere and open 24 hours.

Convenience store coffee, which is also offered by 7-Eleven's competitors here, also chimes well with the latest consumption trend in Asia's fourth-largest economy as more people are taking toned-down approaches to everything amid the economic slowdown.

7-Eleven also operates some stores where customers can use a laundry machine. In December, the convenience store chain started unattended laundry services to meet growing demand from double income families and single-person households.

Among other things, customers can use the service around the clock and pick up their laundry at any time they want.

"Customers can pick up their laundry by visiting the shops and paying the bill," a 7-Eleven official said.

7-Eleven offers unattended laundry services at some shops across the country. (Photo courtesy of 7-Eleven) (Yonhap)

Appearing in almost every corner of a city, convenience stores in South Korea are nothing new to locals anymore. First introduced in 1989 in downtown Seoul, convenience stores in the country have been regarded as corner stores, selling tobacco, instant foods and some daily necessities at high prices.

For the past few years, aided by a drastic change in lifestyle and demographics, convenience stores here, however, have witnessed a stellar growth, with their sales surging by what literally is an eye-popping pace.

For instance, convenience stores took on department stores in terms of revenue growth last year. The combined sales of the top three convenience store brands -- CU, GS25 and Seven-Eleven -- stood at 14.25 trillion won (US$12.61 billion) last year, higher than the combined revenue of 12.29 trillion won by the top 3 department stores -- Hyundai, Shinsegae and Lotte.

Withme's convenience store at Seoul Arts Center sells albums and music-related items that customers can listen to before they buy. (photo courtesy of Withme) (Yonhap)

Their jaw-dropping performance was mainly driven by a social trend -- increased spending by people who dine or drink alone, and diversified product portfolio and services.

Surging consumption by lone diners and drinkers is largely attributed to a rapid rise in the number of one-person households in South Korea. In 2015, single-member households numbered 5.2 million, accounting for 27.2 percent of total households and becoming the most common household type in the country.

"The latest consumption pattern is related to the increase in single-person households," said Park Jong-yeol, an analyst at HMC Investment & Securities. "Lone diners and drinkers frequent convenience stores in their neighborhoods instead of visiting large discount stores away from their homes."

But local convenience stores are faced with a maturation and increasingly severe competition with a sharp rise in similar retail shops, which means that they are urgently rushing to transform themselves with diversified services and goods needed for specific customers.

"Convenience stores are not just a store that sells goods and services," said Son Yun-kyong, an analyst at SK Securities. "They are now struggling to better reach out to more customers with unthinkable and creative goods and services."

Withme's do-it-yourself food cafe at Starfield Hanam, west of Seoul (photo courtesy of Withme) (Yonhap)

Indeed, local convenience stores have been nimble in changing their product portfolios and marketing strategies -- transforming their shops into ones that are bigger and more upscale, compared with their predecessors.

Many convenience stores are taking what can be considered an innovative, experimental move to pioneer a new market trend by outfitting their shops with various facilities and partnering with players in other segments.

For one, Withme, a latecomer convenience brand in the country, recently opened a shop at the Seoul Arts Center in southern Seoul in which customers can experience high-quality classical music or use headsets. On the wall of the convenience store, popular artists' music albums are displayed.

The convenience store chain also runs a shop at Starfield Hanam, the nation's largest shopping theme park, just on the southeastern outskirts of Seoul, to woo more customers. The shop allows customers to make their own food boxes with cooked side dishes.

"Our new concept, which is far differentiated from others, will be welcomed by customers, and we will work hard to create various types of shops" said Kim Sung-young, the chief executive of Withme.

CU, the nation's largest convenience store chain, runs a shop for visitors at a popular "noraebang," or karaoke rooms, in southern Seoul. (photo courtesy of CU) (Yonhap)

There are now some 33,000 convenience stores nationwide, which represents a 20 percent hike from five years ago, and more stores are expected to come in the coming years, pushing the market toward further saturation and compelling the chains to get ever more creative in their services.

"Convenience stores need to stock their shelves with different items or exploit new customer segments, particularly seniors who don't want to shop for and carry home large items like rice, mineral water and alcohol," said Son of SK Securities.

Customers enjoy lunchtime at a cafe run by 7-Eleven in southern Seoul (photo courtesy of 7-Eleven) (Yonhap)


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