Korean economy and franchise business
We consider South Korea a developed market, which is no different from the United Kingdom or the United States. Korean customers expect and demand high-quality products. Lately, everything seems to be preceded by K: K-Pop, K-food, K-beauty, K-movies; Why not go to your local K-Culture Festival? There will definitely be one for you or coming soon. Korean culture is currently on fire and has been warmly welcomed. Domestic franchisors, precisely, are riding this wave and are rapidly spreading internationally – China is the first choice of Korean franchisors. However, for overseas franchisors, what is the market like?
GDP was $1.2 trillion in 2013, and consumer spending and confidence are projected to increase by 2014 and 2015. Hyundai research institute report predicted that Korea would expand up to 3.5% in the first half of 2015, and in another half, it would expand by 3.6%.
Considering Korea’s relatively slow Asian growth, this is a good target for franchisors due to the stable growth of historical years, a rich consumer base, and the country’s early growth. The average household disposable income was the US $3150 in the 2nd quarter of 2014, A rise up to 2.8% in the next half quarter, with significant growth in the bakery, confectionery and snacks, coffee and tea, and juice and beverage sectors. (statistics Korea).
Demand for foreign brands extends to a wide range of channels and, more recently, channels. 65% population of Korea is classified as middle class, so, unlike other countries and nations, there is no system to classify the nation as upper class or middle class. Co-sponsored by the media and a relatively high level of travel experience, Korean consumers are well versed in a developed, global market.
Korean customers have a strong buying history of foreign brands, so they know the value of money. They also know high-quality brands and the Philosophy of marketing a channel. They always try to taste new brands so that they will make a better image of their lifestyle.
So, for a franchiser market have to be more unique and satisfactory to meet the level of customers. For example, 80% population of Korea is engaged in online shopping. They love online shopping instead of physical activity, so they value their credit cards. Korea’s annual credit card transactions are 65% higher than the United States. This combination means that a large proportion of online spending and retail e-commerce is expected to reach $ 25.3 billion by 2017 (Border Free). Every marketing strategy should be multi-channel to promote their products, and their sales will be increasing in the online system. They should utilize technology and offer more efficient and satisfactory online shopping channels and delivery.
The Korean population is urbanized and aging. The median age was 39.1 years in 2012, and more than 60 groups expected that by 2021 it would be about 25% of the population (Korean statistics). Some franchisors can already target this old market, while others can easily adapt or target this group. However, don’t be discouraged for the rest of us; as PWC reminds us, 70% of the population lives mostly in retailers that target the 15–64 year old demographic.
More than 90% of the population lives in urban areas. This population is large, densely populated, and retail premises come at a premium. 4 main populated areas of Korea are Busan metro -4 million, Seoul metro -15 Daejeon -2 million, Daegu metro -3 million.
Key retailers are set to open mega-malls outside major cities in the coming years, but currently, Gyeonggi (the area around Seoul) and Seoul account for 42% of total store space in all of Korea (www.kintex.com). Hypermarkets and supermarkets lead retail channels, and this lead will expand as it matches the 3 main shopping drivers of choice, convenience and price.
Despite the economies of scale enabling large shopping complexes to compete effectively with smaller stores, operators always strive to distinguish themselves. Improving the buyer experience by offering the latest trend brands is an important way to do so. Not only are they looking for interesting overseas tenants, but these operators are also ready to take master contracts and advance concepts in their formats.
If this is an interest registration strategy, keep in mind that these companies are looking for a brand that will drive traffic, so the product or service must either have an established name or a strong, unique element with it. It must be attached. It can be unique good USP and goods with long-term stability, a very effective way to introduce your brand in Korea – mainly because the cost of educating the population will be borne by the goods operators and assure you Maybe it will be done with a higher level of skills.
The franchise market was estimated at $ 89.8 billion in 2013, with approximately 30,000 franchises. There were 691 service franchises, 2089 food shop franchises, and 283 retail franchises (exports. govt).
Even with the recent decline in GDP, the franchise industry has shown respectable growth in recent years, with an average of 200 new franchises opening annually since 2010.
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