The Korean Retailing Sector since the 1970s: Government, Consumers and the Rise & Fall of the Department Store Jonghyun Yi A thesis submitted to the Department of Economic History of the London School of Economics and Political Science for the degree of Doctor of Philosophy, London, November, 2008 1 UMI Number: U615286 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. Dissertation Publishing UMI U615286 Published by ProQuest LLC 2014. Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106-1346 • cw iynuftw v ■ • HWCfTtlffllllint SfcWWB Declaration I certify that the thesis I have presented for examination for the PhD degree of the London School of Economics and Political Science is solely my own work other than where I have clearly indicated that it is the work of others (in which case the extent of any work carried out jointly by me and any other person is clearly identified in it). The copyright of this thesis rests with the author. Quotation from it is permitted, provided that full acknowledgement is made. This thesis may not be reproduced without the prior written consent of the author. I warrant that this authorization does not, to the best of my belief, infringe the rights of any third party. 2 Abstract This thesis is a study of the Korean retailing sector since the 1970s. It focuses on analysis of the three elements in retailing development - government, retailer and consumer - which engaged in a process of mutual interaction. It is used to address two main questions, namely why was the leading role of the department store in the Korean consumer market delayed, and why was its golden age both quite explosive and extremely short. The thesis argues that the emergence of modem retail formats in Korea was artificially delayed through consumption repression. It also argues that the explosive golden age of the department store industry was a result of the combination of two sets of behaviour: a strategic change by the department stores to focussing on necessities rather than luxuries; and the enthusiastic consumption attitude of consumers in response to previous consumption repression and consequent purchasing power. It shows that the short golden age of the department store industry was in addition closely related to the ownership structure of the big retail businesses which also owned other types of retail format. Companies made strategic decisions that led to the Korean department store sector moving back into the luxury market and giving the existing mass market up. The research also examined the application of the conflict theory of retail evolution to Korea, and the thesis argues that this theory is of limited applicability. Under Korean conditions of ownership, the evolution of retailing, particularly the department store format, was likely to depend not on competition and conflict between different types of retail format, but on mutual cooperation for the profit maximisation of the big retail businesses. The thesis also considers consumption as a criterion of equality or 3 inequality, and argues that consumption should be regarded as a factor that had a huge effect on people's willingness to comply with the prevailing economic system. 4 Acknowledgement I realised as I was finishing my doctoral thesis that it could not have been completed without various help from others. Until now I was accustomed to think that it had just been the lonely work of me. However, looking back, I have in the end realised that there have been various deep rivers, across which I could not have come by myself and various high mountains up which I could not have climbed by myself. Furthermore, I have apprehended that there already existed historical factors and tools for analysis concerning the thesis as if they existed for the thesis. As a result, I cannot deny that I have merely come across the deep rivers and climbed up the high mountains, holding the hands of guides who have emerged unexpectedly as if they had been dispatched by God. Presumably the completion of the thesis would not have been possible without their help. First of all, this thesis may not have been possible without the Korean historical context in which the contemporary people had lived and died. The considerable achievement and distinctiveness of Korean modem history are just the results that they have produced intentionally or unintentionally in the process of a fierce struggle for survival both in the national level and in the international level. This thesis tried to trace just a small part of them. It was Maeil Business Newspaper that has given me various chances to experience such context for over 15 years. The lesson that I have learnt from the experience is that every social phenomenon is a necessary result with proper reason. There is no result without reason. This meant to me that every social problem emerges with resolution. However, without a suitable viewpoint and methodology to analyse such a phenomenon, the lesson would only be the potential for finding the resolution. 5 For this, it was Professor Chung, Unchan and Professor Kim, Soohaeng of Seoul National University that led me to more study. They still make me aware of how an intellectual should study and behave for contribution to a balanced development of the society even if their student is already middle age. Their guidance for me was transferred to the responsibility of Professor Janet Hunter. She has been my supervisor since the master program and has taught me scrupulously. She has always guided me to the correct way whenever I lost my way in confusion. It was Professor Hunter who trained me to know significant principles of research while she gave me enough liberty to examine distinct contexts. I have to thank Professor Lee, Il-young, Dr Lee, Byunghee and Dr Hwang, Deoksoon. They helped to make my thesis balanced by not allowing my argument to be over-emphasised or biased. Dr Lee, Seungryel gave me a wider horizon of interpretation from the viewpoint of a historian with warm encouragement. I cannot forget consideration of professor Sung, Nagsun who discussed about my topic with me until dawn when I was desperate. I should also thank Bonghyun for his supportive friendship in times of difficulty. Soojung, Juhyun, Hyunseok, Seongsoo, Jaejin are my Korean colleagues at LSE who often exchanged opinions with me concerning Korea’s previous and current situations and whose views have been reflected in the thesis. I must admit that I am not a good son to my parents. My parents who are over eighty years old spared no efforts to support me. I cannot find proper words to express gratitude to my parents. The belief in me from my elder brother and sister has also been a great help to me to carry on my work. Professor Lee, Chulwoo, my nephew, has also been a tremendous advisor during my late study. Without them, it is very doubtful that I could have completed this thesis. 6 I still do not know whether it is the dad’s consideration for his son or the son’s consideration for his dad that a young boy studies with his dad in a library. Even if only what his dad did for his son was to go to the library with him for his dad’s own study, my son, Keonwoo, who has grown with sound body and mind, is also one of the co­ authors of this thesis. Without help of my wife any small part of my thesis could not be complete. In fact, my wife, Miyoung is another main author of this thesis. This thesis would be a work which we three dedicate to our parents. 7 TABLE OF CONTENTS DECLARATION/2 ABSTRACT/3 ACKNOWLEDGEMENT/5 LIST OF FIGURES/16 LIST OF TABLES/20 ABBREVIATIONS AND ACRONYMS/22 ECONOMIC POLICIES AND REGULATIONS OF THE RETAIL INDUSTRY/25 CHAPTER I: THEORIES AND FRAMEWORK....................................................29 1. Introduction ................................................................................................................................ 29 2. L it e r a t u r e R e v ie w ............................................................................................... 34 2.1. Existing studies of the Korean economy ......................................................... 34 2.2. Existing studies of the retail sector. ..................................................................36 2.3. Existing studies of department stores...............................................................43 3. T h e o r e t ic a l f r a m e w o r k ....................................................................................45 3.1. Environmental Theory: Convergence or divergence in the evolution o f the retail institution ............................................................................................................. 46 3.2. Cyclical theory .....................................................................................................48 The wheel of retailing ................................................................................................48 The retail accordion theory .......................................................................................49 Other theories ...........................................................................................................