Academic journal article Contemporary Economic Policy

Effects of the Sunday Shopping Restriction in Korea

Academic journal article Contemporary Economic Policy

Effects of the Sunday Shopping Restriction in Korea

Article excerpt

I. INTRODUCTION

The Korean government implemented a Sunday shopping regulation in 2012. This restriction is unique in its purpose and implementation; while most other countries have enforced Sunday shopping regulations for religious reasons or employee protection, Korea's regulation aims to protect its traditional markets and smaller retailers. Thus, unlike in many other countries, the restriction is applied only to superstores and not to all retail stores. (1, 2)

Because Korea's Sunday shopping regulation came into effect on April 22,2012, it has brought much controversy and a series of lawsuits. Some business owners at traditional markets and small-and medium-sized retail outlets expect it to boost their sales, but others doubt its effectiveness and call for much stronger measures. On the other hand, the targets of regulation, so-called megastores and super supermarkets (SSMs), claim that the regulation significantly damages not only their own sales but also the whole economy. They contend that the sales decrease will lower the income of first-hand producers such as farmers and result in fewer jobs for part-time employees. Further, they argue that while the restriction on Sunday shopping may help traditional markets and small retailers survive in the short run, it will lower their productivity and profitability in the long run. At the same time, consumers complain of reduced flexibility in the choice of shopping places or times.

Previous researches both theoretically and empirically have investigated the effects of the shopping hour deregulation. From consumers' point of view, because an extension of shopping hours allows consumers to choose more convenient time to shop, the opportunity costs of shopping time (or value of shopping time) is reduced. Morrison and Newman (1983) and Tanguay, Vallee, and Lanoie (1995) theoretically showed that due to reduced costs of shopping time, some consumers switch from easily accessible small or medium retailer to large retailer and hence the market shares of large stores increase. On the other hand, Inderst and Irmen (2005) and Shy and Stenbacka (2008) examined the retailers' choice of opening hours under deregulation. They showed that depending on the proportion of consumers who prefer daytime shopping, flexibility of consumers' shopping hours, and cost of retailers, different opening hours are chosen. Wenzel (2011) further developed the theoretical model in which one retailer with two stores and the other independent retailer compete and showed that when retailers have large efficiency difference, the more efficient retailer chooses longer shopping hours than the less efficient retailer. Shy and Stenbacka (2008) and Wenzel (2011) also argued that their models do not justify restrictions on shopping hours since deregulation increases social welfare.

Along with theoretical research, empirical work has been carried out to examine the effect of deregulation on sales, price, employment, and welfare. (3) Morrison and Newman (1983) showed that the deregulation of shopping hours in Vancouver, Canada, during 1977-1979 redistributed sales from small stores to large stores (i.e., the market share of chain stores increased during the December when the shopping hours are extended). Kajalo (2003) using the Finish survey data showed that when the Sunday shopping was allowed for all the stores from June 1997 to August 1997, large stores experienced increase in sales and profits and supported flexible opening hours, but small stores did not extend opening hours despite the deregulation. The Information and Forschung (Ifo) Institute (1995) also predicted sales increase of large stores but sales decrease of small stores using a simulation (Pilat 1997). On the other hand, Kay and Morris (1987) and Williamson et al. (2006) using a simulation based on UK data showed that deregulation leads to decrease in retailers' costs and hence price decrease. However, Tanguay, Vallee, and Lanoie (1995) showed that the deregulation of opening hours in Quebec, Canada, led to the price increase at large stores and argued that the demand for shopping at large store increased as consumers are willing to pay more for greater shopping flexibility. …

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