CU, GS25 in fierce race for top spot in Korea’s convenience store market

Using multiple measures, CU and GS25 claim they are the No. 1 player in South Korea’s convenience store (CV) market.

CU, operated by BGF Retail Co., says it is the top Korean convenience store chain in terms of store count and profitability. In contrast, GS Retail Co., the operator of GS25, says that it is Korea’s No. 1 in terms of sales revenue.

The competition for the top spot is so fierce that the two rivals employ various tactics to become the undisputable leader in the Korean market, with CU striving to get ahead of GS25 in sales while GS is making efforts to boost profitability.

According to BGF Retail, CU has created and sent mobile convenience stores to regional festivals and sports events more than 20 times this year.

Modified 3.5-ton trucks, the mobile stores sell a variety of products such as snacks, drinks and portable batteries in areas lacking convenience stores.

BGF Retail said these trucks are utilized for short periods, ranging from one day to just a few days.

In March, CU made mobile convenience stores official by stipulating such practices in its in-house regulations after running the system on a trial basis for months.

HIGHLY PROFITABLE

The mobile stores have proven highly profitable, with daily sales exceeding ten times those of regular stores.

For example, during a soccer match between Seoul E-Land FC and Suwon Samsung Bluewings in August at Mokdong Sports Complex in Seoul, CU set up a mobile store outside the venue near the visiting team's section, which lacked convenience stores.

In just one day, over 1,200 people visited the store, generating tens of millions of won in sales, according to BGF officials.

Given that the average daily sales of a regular convenience store range from 1.5 million to 2 million won ($1,115-$1,487), mobile stores earned more than ten times higher. The revenue from these mobile stores is recorded as part of CU's franchise store sales.

In terms of store numbers and profitability, CU is already ahead of GS25.

CU has been running the highest number of convenience stores in Korea since it outnumbered GS25 in 2020.

CU also outearns GS25.

In the first half, CU posted 108.8 billion won in operating profit, higher than GS25’s 91.2 billion won.

"Achieving top sales is the final step for CU to firmly establish itself as the number one convenience store in Korea,” said an industry executive.

NARROWING SALES GAP

To increase its sales, CU has also launched “hit products” this year, such as Dubai-style chocolates and fresh lemon highball, each generating hundreds of billions of won in sales, fueling expectations that it could surpass GS25’s quarterly sales before the end of this year.

In the first half, GS25, with its sales of 4.16 trillion won, was ahead of CU, which posted 4.12 trillion won in sales.

The 40 billion won in sales gap, however, narrowed from a gap of 113 billion won three years earlier.

On a yearly basis, the sales gap between GS25 and CU also narrowed fast from 449.2 billion won in 2021 to 202.2 billion won in 2022 and 114 billion won in 2023.

GS COUNTERATTACKS WITH QUICK COMMERCE

GS25 is countering by striving to increase its average transaction value.

Instead of aggressively opening new stores, GS25 has been trying to boost profitability.

As part of such efforts, GS25 is strengthening its quick commerce services, delivering convenience store products within an hour through its own app and third-party platforms such as Korea’s two largest food delivery apps – Baedal Minjok (Baemin) and Yogiyo.

According to GS25, the average order value for delivery is 2.5 times higher than the sales value of in-store customers.

In May, BGF also partnered with domestic pizza franchise GoPizza to unveil GS25 stores where customers can pick up or order pizza for delivery.

Currently, there are around 1,000 such locations, with plans for GS25 to increase those stores to 1,500 by the end of the year.

Write to Sun-A Lee at Suna@hankyung.com
In-Soo Nam edited this article.