After a seven month delay, British retailer Tesco has opened an outlet nearly 3,000m2in size in South Korea, its largest market outside of the UK.
However, this store unveiling comes amidst company profits in the country being hit hard by government regulations aimed at protecting local sellers, including restricting trading hours and fining stores that set up without the local merchants’ consent.
These new regulations are targeting all larger foreign retailers in South Korea and there are early indications that they will dissuade other investors from bringing their business to the country.
'In my view, there is no longer much merit in investing in the South Korean market,” said Lee Seung-han, chairman of Tesco’s Korea-based subsidiary the Homeplus Group. “Investment from (Tesco) headquarters will decrease.'
The government regulations on large retail chains came not long after South Korea signed free trade agreements with the European Union, which reduced supermarket prices of produce.
New restrictions prohibit large foreign retailers from operating two Sundays a month or opening a store near a marketplace with rows of mom-and-pop vendors are set to come into effect this month.
Seung-han said Tesco was not considering abandoning the market altogether, but conceded that regulation and market saturation have dimmed the prospect of new investment after entering South Korea in 1999.
Competition in South Korea has already seen US retailer Walmart and French Carrefour depart the region in 2006. At present, US wholesaler Costco remains, but it operates just nine stores in the country compared to 15 in Japan.
