Overview of Korea Economy and Franchise Business

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Overview of Korea Economy and Franchise Business


“We consider South Korea as a developed market, meaning it is no different to the UK or the US… Korean consumers are demanding and expect high-performing products.” Hari Nair: Managing Director, Kimberly-Clark’s.

Recently everything seems prefixed with a K: K-Pop, K-food, K-beauty, K-movies; why not go to your neighborhood K-culture festival, sure there has to be one in your area, or just around the corner. Korean culture is on fire at the moment and has been warmly received. Domestic franchisors have, quite rightly, been riding this wave and rapidly expanding internationally-China being truly a Korea franchisors first choice. However for an overseas franchisor looking in, what is this market like?

GDP was US$1.2 trillion in 2013 and predicted to go up as consumer spending and confidence grows through 2014 and 2015. The Hyundai Research Institute latest report predicts Korea will expand by 3.5% in the initial 1 / 2 of 2015 and 3.6% in the second half.

Considering Korea’s 韓國代購 comparatively slower Asian growth, it remains a good target for franchisors due to historical years of stable growth, an affluent consumer base and early advancement of the country. The common disposable income per household per month was US$3150 in the next quarter 2014, a growth of 2.8% from the next quarter 2013, with significant rises in bakery, confectioneries & snacks, coffee & tea, and juice & beverages sectors (Statistics Korea).

The demand for foreign brands spans a variety of sectors and recently a broader selection of channels. 65% of the populace is classified as middle-class (OECD) so unlike a great many other Asian countries there is not the general trend of a new, emerging middle-class. Supported by media and a comparatively high amount of travel experience, the Korean individuals are knowledgeable in a developed, globalised market.

. Korean consumers have a solid purchase history of foreign brands in order well as valuing money, they will have a high understanding of brand philosophy and marketing channels. They’ll readily try new products and so are always seeking new tastes and ways to improve their lifestyle and image.

For a franchisor, the marketing needs to be more sophisticated to complement the level of the buyer. For instance, nearly 80% of the populace is online, making it probably the most connected country on the planet! plus they love their bank cards. Annual charge card transactions are over 65% greater than the USA. This combination means a high proportion of online spending and retail ecommerce is predicted to touch $25.3 billion by 2017 (Borderfree). Any marketing strategy needs to be multi-channel and use areas of social media to advertise brands and make use of the technology to offer more efficient shopping channels and delivery.

Korea’s population is ageing and urbanized. The median age in 2012 was 39.1 years and the over 60 group is predicted to take into account nearly 25% of the population by 2020 (Statistics Korea). Some franchisors may already target this older market whereas others may be able to easily adapt or extend to focus on this group. But also for the rest of us do not despair, as PwC reminds us, 70% of the populace remain within most retailers target demographic of 15-64 years old.

With over 90% of the population living in urban areas, these conurbations are massively populated, wealth dense spaces and retail premises come at reduced. The 4 main population areas: Seoul metro-15 million, Busan metro-4 million, Daegu metro-3 million, and Daejeon metro-2 million.

Key retail players are set to open mega malls outside of the main cities over the coming years but presently Gyeonggi (the area directly surrounding Seoul) and Seoul take into account 42% of the full total shop space in every Korea (www.kintex.com). Supermarkets and hypermarkets lead retail channels which lead will increase as it matches the 3 main purchase drivers of choice, convenience and price.

Despite economies of scale enabling big shopping complexes to effectively contend with smaller stores, operators are always wanting to differentiate themselves from each other. Enhancing shoppers experience by offering the latest trend brands certainly are a main way they do that. They are not only searching for exciting overseas tenants, these operators are also willing to take on Master agreements and roll out concepts across their formats.

If this is an entry strategy of interest, be aware that these companies are looking for a brand that may drive traffic, therefore the product or service either has to an established name or have a solid unique factor attached to it. Quirky with longterm viability can be good USP and malls, a very effective way to introduce your brand into Korea-mainly because the cost of educating the population will be borne by the mall operators and you may be assured it will be done with a higher level of proficiency.

The franchise market in 2013 was estimated at US$89.8 billion with nearly 3,000 franchises. There have been 283 retail franchises, 601 service franchises and 2,089 food service franchises (export.gov). Even with recent downgrades of GDP, the franchise industry has displayed respectable growth over modern times with on average 200 new franchises opening annually since 2010.

Koreans are very available to partnering with overseas franchisors, especially with those that have an existing reputation in Korea or core values which reflect their origin country. Koreans aged 55 and over have recently proved themselves to be good franchisees because they have significantly more capital and knowledge, and being a family orientated culture, will pass the business right down to their children. The franchise industry regulations ensure business generally runs smoothly and Korea is regarded as a straightforward spot to franchise into.

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