Familymart to pull out of Korea

Familymart is the number three convenience store chain, but it is losing sales share to both of the larger two firms. Now, its core strategy of overseas expansion has taken a major blow with the chain planning to pull out of Korea, wiping out 60% of overseas stores.

Familymart announced a backward step in its plans for international expansion last month, saying it would pull out of the Korean market. It first entered Korea back in 1990, but its current operation is through a 25% stake in a joint venture with BGF Retail. The Japanese firm will sell the entire stake in May.

BGF operates 7,925 stores in Korea under the “CU with Familymart” banner. Press reports suggest insurmountable differences with BGF are the reason for Familymart’s pullout. In June 2012, BGF changed the store banner from the original Familymart and expanded its own involvement in store merchandising and supply, reducing the share of sales for Familymart’s own product lines.

The disagreement must have been severe. At the end of February, Familymart operated around 13,000 stores overseas, and had higher sales from international operations, including the royalty fees from Korea, than for its domestic business. The decision to pullout means it loses more than half of its international chain at a stroke and is leaving the only market where it is larger than Seven Eleven.

Familymart is now expected to put greater efforts into its other major overseas markets that include Taiwan, Thailand and Indonesia, and confirmed that it would consider re-entering Korea at a later date. As with strategic developments in China and elsewhere, it may also consider establishing its own independent operation in overseas countries where possible.