The warehouse-style discount store Trader's Wholesale Club (hereafter Trader's) is doing a great job for Emart. As high prices continue, consumers seeking value for money are flocking to the warehouse-style discount store where they can purchase large quantities of products at lower prices. Last year, Trader's, which had 22 stores nationwide, made double the sales per store compared to Emart, which has 131 stores.
◇ Trader's operating profit surpasses 100 billion won... sales per store at 123.3 billion won, twice that of Emart
According to related industry sources on the 5th, Trader's is estimated to have surpassed an operating profit of 100 billion won last year. Compared to the same period last year (58.1 billion won), this represents an almost double increase and indicates that Trader's has also outperformed the operating profit of Emart, an existing discount store. It is the first time since Trader's launched in 2010 that the annual operating profit has exceeded 100 billion won.
Amid a long-term recession and the rise of online shopping, Trader's is receiving evaluations that it plays a key role in driving Emart's core discount store business.
Trader's revenue, which was at 564 billion won in 2012, increased to 3.337 trillion won in 2023. Cumulative sales for the first three quarters of last year were 2.7135 trillion won, with operating profit reaching 87.1 billion won, marking increases of 5.9% and 84%, respectively. Securities analysts estimate that Trader's sales last year were in the vicinity of 3.5 trillion won, with operating profit around 110 billion won.
In contrast, Emart's cumulative sales for the first three quarters of last year were 8.8642 trillion won, and its operating profit was 66.8 billion won, reflecting decreases of 2.5% and 8.6%, respectively. As of the end of September last year, Emart had 131 stores, while Trader's had 22 stores. Simple calculations show that during this period, Emart generated sales of 67.6 billion won per store, while Trader's achieved sales of 123.3 billion won per store.
In the market, it is analyzed that the increase in consumer purchasing behavior, which involves buying large quantities of products at low prices due to high inflation, corresponds with the improvement in profitability from the integrated purchasing of Emart, Trader's, and Emart Everyday, which began last year.
Warehouse-style discount stores sell fewer items (SKUs) than hypermarkets but offer them at prices comparable to online products in large quantities. They display items on pallets to reduce labor and interior expenses.
Large hypermarkets like Emart and supermarkets like Emart Everyday also aim for ultra-low prices year-round through integrated purchasing, but considering the characteristics of warehouse-style discount stores, Trader's price competitiveness is bound to stand out. Typically, warehouse-style discount stores are known to be about 10-15% cheaper than hypermarkets.
According to Trader's, sales of bulk fresh food and alcohol products such as fruits (17%), vegetables (14%), sashimi (17%), seafood (12%), deli (ready-to-eat food, 12%), meat (8%), and alcoholic beverages (10%) saw significant growth last year. Additionally, sales from its private brand PB "T Standard," priced 20-30% cheaper than general brand manufacturers, increased by 2.5% compared to the previous year.
◇ Costco achieves sales of 343.6 billion won per store... will competitors benefit from membership fee increase?
To grow Trader's, Emart changed the store sign from 'Emart Trader's' to 'Trader's Wholesale Club' in October 2022, implementing a new membership program, 'Trader's Club,' and its own reward points system called 'TR Cash.'
This year, two new stores are planned to open. The 23rd store will open in Magok, Seoul, on the 14th. This will be the first new opening in 14 months after December 2023 and the second store in Seoul, following the Wolgye store opened in 2019. A new store will also be unveiled in Guwol-dong, Incheon, in the second half of the year.
The U.S.-based warehouse-style discount store Costco is also showing steady growth. For the last fiscal year (September 2023 to August 2024), Costco Korea reported revenue of 6.5301 trillion won, a 7.6% increase from the previous fiscal year. Operating profit rose by 16% to 218.6 billion won, while net profit jumped by 58% to 224 billion won. With 19 stores, Costco achieved sales of approximately 343.6 billion won per store.
However, starting in May, the domestic membership fee is set to increase by up to 15%, prompting interest in whether competitor Trader's will benefit from this. Costco has announced that the fee increase for Gold Star memberships will rise from 38,500 won to 43,000 won (11.7%), Business memberships from 33,000 won to 38,000 won (15.2%), and Executive memberships from 80,000 won to 86,000 won (7.5%).
Currently, Trader's paid membership fees are 30,000 won for standard and 70,000 won for premium. Unlike Costco, which only paid members can access, Trader's can be used by non-members as well.
A distribution industry official noted, "Warehouse-style discount stores are favored by family-oriented customers who prefer to shop in bulk due to high prices," and added, "Competitive pricing and securing exclusive products not available elsewhere are essential for steady growth irrespective of the economy."