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[64] 2012.01.09
Possible to reduce the retail margin of large marts Calling for lowering the sales price of products by reducing the retail margin of large marts





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Press Release

 
 

Effective Date

: Jan, 9, 2012

Dept. in Charge

: Cost Analysis Team        

Tel. 

: 02-774-4060

 

 

 

Possible to reduce the retail margin1) of large marts

Calling for lowering the sales price of products by reducing the retail margin of large marts

 

The Cost Analysis Team of The Korea National Council of Consumer Organizations (KNCCO) (President Kim Jae-ok) has analyzed the retail margin of large marts and the change in operating profit and ratio of operating profit to net sales of large marts and manufacturers for 14 items 2) including cookies, wheat flour and sugar. The ratio of operating profit to net sales of large marts has continuously increased from 2001 to 2010.

 

Depending on the size of the stores, the ratio of retail margin 3) was 23.8% for large marts and 24.1% for SSM, which was lower than that of department stores (29.4%) but higher than small and medium-sized supermarkets (23.3%) and traditional markets (22.0%) (Refer to .). Among the items examined for retail margin, the 6 items of bean curd, cooking oil, toilet paper, orange juice, ice cream and coffee showed the highest ratio of retail margin at large marts and SSM (except in department stores).

The average ratio of retail margin for large marts was higher than traditional markets and small and medium-sized supermarkets, which shows that the sales prices at large marts are not cheaper than those at traditional markets as well as small and medium-sized supermarkets.

Looking at the ratio of retail margin for each large mart, Lotte Mart had the most number of products (5) with the highest ratio of retail margin (sugar, Saewookkang (shrimp snack), bean curd, toilet paper and red pepper paste), followed by 3 products (beer, orange juice and ice cream) at E-Mart and 2 products (milk powder and coffee) at Home Plus (Refer to

.).

 

 

 

The Ratio of operating profit to net sales for large marts has continued to increase from 2001.

Retail prices can be reduced by adjusting the ratio of retail margin for large marts.

 

Meanwhile, the average profit on sales of 14 daily necessities is 61% for large marts and 39% for manufacturers. Among the items investigated, the ratio of operating profit to net sales of manufacturers was higher than that of large marts for only 4 items 5) while for 11 items, 6) the ratio of operating profit to net sales of large marts was higher (Refer to

.). Moreover, while the ratio of operating profit to net sales of large marts has continued to increase, from 5.4% in 2001 to 7.8% in 2010, the ratio of operating profit to net sales of manufacturers continued to decrease from 9.5% in 2001 to 6.0% in 2010 (Refer to
.). It is analyzed that with the appearance of an enormous distribution industry, the logistics of the manufacturing industry is being concentrated in several distributing companies and the relationship between manufacturers and large distribution companies is not maintained equally.

 

 

 

On the basis of the results of the examination, KNCCO will demand large marts to reduce the price of commodities by adjusting the ratio of their retail margin and also continue to monitor the prices in the general market to stabilize the prices of daily necessities.

 

                      

1) It means the value newly added during the process of distribution in which the distribution cost, sales cost, and the profit of the distribution company are included.

2) Cookie, wheat flour, sugar, juice, coffee, red pepper paste, bean curd, milk, milk powder, ice cream, Ramen, cooking oil, beer and toilet paper

3) Ratio of retail margin is the ratio of the value newly added during the process of distribution including the distribution cost, sales cost, and the profit of the distribution company, to sales price. The retail margin and the ratio of retail margin do not mean the net profit of a distribution company.

4) 2001 Outlet, Kims Club, Hanaro Club

5) Beer, cookie – Choco Pie, coffee, ice cream

6) milk powder, sugar, cooking oil, milk, rolled toilet paper, orange juice, bean curd, wheat flour, Ramyeon, Saewookkang, red pepper paste

7) The average ratio of operating profit to net sales for manufacturers in 14 items



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