Research Reports
Procurement Behavior of Agricultural Products by Hypermarket and Future Expansion Outlook in Korea
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AuthorSeo, Seongcheon
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Publication Date2005.12.01
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Original
In Korea, the number of hypermarket (supercenter) store has become over three hundred during 2005. Also, based on the published report by Shinsegae Trade Research Institute, the scale of total sales amount of the retail industry is estimated to be near to 24.4 trillion won during 2005. Due to the large scale of purchase and sales' volume of handling agricultural products, the hypermarket industry in Korea has also imposed a huge impact on both retail and producers' shipping-point market. Thus, we performed research project focusing on identifying the procurement and sales behavior of agricultural products by major supercenters in Korea. After extracting several meaningful implications from our research, we tried to convey the key viewpoints of buyers to the farm producers in order to help them taking some proper actions for enabling successful trade with the hypermarket industry.
As the beginning step, we performed both written paper survey and in-depth interview with several buyers who are in charge of purchase & sales management of agricultural products pertaining to the major seven hypermarekt companies (E-Mart, Homeplus, Lotte-Mart, Wal-Mart, Dongbang-Mart, Top-Mart, Big-Mart) in Korea.
If we are mentioning about major characteristics of agricultural products in hypermarket, the risk associated with retail sales is evaluated much higher than the general manufacturing products due to high managing cost to preserve the freshness of products and overstock issues by the slow turnover. However, as the management know-how is getting filed up and sophisticated via advanced IT (Information Technology) and expertized buyers' management skill, it will be under the control rather than out of control. Further, it's on the track of diminishing trend. Thus, the role of agricultural products in the hypermarket has been shifted from a kind of bate (loss leader) alluring shopping customers visiting the shopping center more often to the profit generator maximizing consumers' satisfaction of shopping activities while purchasing both fresh agricultural goods and other manufacturing products through one-stop shopping. The sales activity of fresh and good agricultural products is linked to boost up the upgraded store image and total profit of hypermarket company.
In the hypermarket industry, the estimated amount of agricultural products excluding fishery and livestock products is around 3.22 trillion won. It is forecasted to be extended in the near future. Mentioning about main reasons, consumers exhibits a shopping trend to choose hypermarket as top priority shopping place when purchasing fresh agricultural goods. They are also more sensitive to the food safety and the sellers' credibility while putting so high preference of hypermarket. Also, on the matter of procurement of agricultural products by hypermarket retailers, as the transaction volume is getting much bigger, the level of requirement is more intensified than before such as lower unit price and higher product quality.
To suggest the proper reaction of individual farm producers or farm corporations, we summarize buyers' key requirements for the successful trade with hypermarkets. Producers must be clearly aware of two angles of product sales movement in hypermarket. One is good quality and safe products. However, it's only necessary condition to fulfill the buyers' requirement. The satisfactory condition is supposed to make the goods to be attractive to the potential consumers by shape of products and package. The latter condition is also linked to the development of producers' brand. As in-depth requirement, producers should be more proactive on the matter of catching up shopping consumers' needs and preference trend. To achieve scale of economy and lower production cost, the volume of farm production should be enlarged, too.
Researchers: Seong-Cheon Seo, Byung-Ryul Kim
E-mail address: sseo@krei.re.kr
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