The Secret to the Growth of Food Material Marts: Innovation or a Clever Trick?

Uncovering the Secrets Behind Their Remarkable Growth

• How food material marts avoid mandatory closure regulations for large marts
• The secret distribution strategies that create overwhelming price competitiveness
• The impact of food material marts’ growth on traditional markets and neighborhood businesses

Where Do You Go on Large Mart Rest Days?

One Sunday morning, after sleeping in late, you open the fridge only to find it empty. “Oh no, today is the large mart’s rest day!” This familiar scene repeats every second and fourth Sunday of the month. But at that moment, many people think of the local food material mart. While large marts take a legally mandated break, food material marts stay open year-round, welcoming customers. I, too, was surprised by the size and low prices when I visited a local food material mart on a large mart’s rest day.

Their growth is astonishing. Over the past decade, while the combined sales of the three major large marts (Emart, Homeplus, Lotte Mart) increased by only 6.5% and stagnated, the ‘Big 3’ food material marts (Segyero Mart, Jangbogo Food Material Mart, Food Material King Mart) surpassed combined sales of 1 trillion KRW.

Is this simply the result of outstanding innovation, or a victory of clever loophole exploitation? We will thoroughly investigate the hidden secrets behind the dazzling growth of food material marts, their smart strategies, and the shadows of controversy.

The Identity of Food Material Marts: The Strategy Behind the Name

The name ‘food material mart’ originally evokes B2B wholesale warehouses frequented by restaurant owners. But visiting an actual store reveals that bulk products for businesses occupy only a small part of the space; most of the store is filled with groceries and household goods for regular households. Customers are mostly general consumers with shopping baskets rather than business owners.

So why do they insist on the name ‘food material mart’? There is a very clever legal identity strategy behind it. By convention, a ‘food material mart’ refers to a retail store meeting these two conditions:

1. Store area between 1,000㎡ and less than 3,000㎡
2. Not affiliated with a large corporate discount chain

These two conditions have become a ‘magic spell’ that frees food material marts from all regulations. The professional nuance of ‘food material’ helps them evade regulatory scrutiny, buying time to build a B2C retail empire.

Growth Exploiting Legal Loopholes: The Distribution Industry Development Act

At the core of food material marts’ growth is the Distribution Industry Development Act revised in 2012. This law introduced strong regulations such as mandatory closure twice a month and restrictions on late-night hours for ’large stores’ to protect traditional markets and neighborhood businesses.

However, food material marts keep their store size under 3,000㎡ and operate as independent small and medium enterprises, perfectly avoiding the definition of ’large stores’. There are suspicions that some use a ‘split expansion’ method by building multiple buildings under 3,000㎡ connected by corridors. Ultimately, their growth is the result of a meticulous strategy that precisely identifies and exploits legal gaps.

Success Strategies Beyond Regulation Avoidance

Avoiding legal regulations was only an opportunity, not a guarantee of success. Food material marts won customers’ hearts with meticulous business strategies.

Price Competitiveness: How Are They So Cheap?

The strongest weapon of food material marts is undoubtedly ‘price.’ The secret to this overwhelming price competitiveness lies in ‘direct sourcing from production sites’ and ‘disrupting the distribution structure’ by connecting producers directly to consumers without passing through complex central logistics systems. This drastically reduces distribution costs.

Targeting Consumer Trends: Reading the Modern Consumer’s Mind

Food material marts have accurately grasped changing consumer lifestyles.

• Ugly produce: Selling slightly misshapen but equally nutritious and tasty produce at low prices, gaining popularity amid high inflation.
• Bulk and lifestyle combination: Meeting business demand with large-volume products while planning and selling related goods aligned with trends like camping.
• The paradox of repackaging: Dividing bulk products into smaller units to attract single- or two-person households.

Digital Transformation: From Local Mart to Omnichannel Powerhouse

Contrary to the stereotype of old offline stores, food material marts have rapidly succeeded in digital transformation. They built their own apps and online malls, joined B2B platforms like ‘Sikbom,’ and expanded sales nationwide. Some companies saw online sales increase nearly tenfold in one year. They evolved into ‘hybrid predators’ combining wholesale price competitiveness, retail accessibility, and e-commerce scalability.

Success Story: The Management Philosophy of Jangbogo Food Material Mart

Seo Jeong-kwon, CEO of industry leader Jangbogo Food Material Mart Co., cites ’empathy’ and ‘consideration’ as keys to success. He says the reason he visits every store daily is not for products but to “see the faces of employees.” He firmly believes that employee satisfaction leads directly to quality customer service. He also practices genuine local coexistence through prioritizing local hiring and cooperating with local producers, evolving offline stores into regional logistics hubs.

The Dark Side of Food Material Mart Growth: Conflicts with Neighborhood Markets

Behind the dazzling growth lie dark shadows.

• Conflicts with traditional markets: Once protected from large marts, traditional markets now face survival competition with food material marts, the new ’top predator.’ The regulatory benefits intended for traditional markets have instead flowed to food material marts, further shrinking traditional markets’ space.
• Controversies with suppliers: Criticism arises that their huge size and purchasing power force suppliers to sell below cost, raising concerns about worsening profitability across the distribution ecosystem.

At a Glance Comparison: Large Marts vs Food Material Marts

Conclusion: The Future Your Shopping Basket Will Choose

The success of food material marts is both a clever ’trick’ exploiting legal loopholes and a brilliant ‘innovation’ that disrupted outdated distribution structures. They were both opportunists and innovators. Now the choice returns to us consumers.

• Key Summary 1: Food material marts avoid core regulations like mandatory closure by evading the ’large store’ criteria (area, ownership) under the Distribution Industry Development Act.
• Key Summary 2: They offer overwhelming price and convenience through innovative strategies such as direct sourcing, targeting consumer trends, and rapid digital transformation.
• Key Summary 3: However, their growth threatens the survival of traditional markets and small merchants, creating new social conflicts.

Is shopping at a brightly lit food material mart on a Sunday morning the future of smarter, more efficient distribution? Or is it ignoring the loss of diversity in our neighborhood markets as a cost of convenience? Your next shopping basket will decide the future landscape of our society’s distribution.