The rise of staff-free stores in South Korea

SEOUL — At this year’s annual Seoul International Cafe Show which took place earlier this month, automation and smart devices such as drip coffee-making robots enjoyed the spotlight.

“From smart coffee roasters to drip coffee-making robots, there were various opportunities to get a taste of the ‘smart cafe’ experience,” one official at the event said.

These are the latest sign of automation and a demographic shift in South Korea where cashier-free stores have increasingly been popping up on the streets. Over the last few years, retailers small and large have been adopting self-checkout systems, also known as kiosks, or even going completely staff-free to save labor costs and keep stores open late into the night.

Nearly 1,700 “hybrid” stores, which rotate between having staff in the story and going unmanned, are currently in operation between the four major local convenience store chains — CU, GS25, 7-Eleven and E-Mart 24. With over 47,000 convenience stores in the country, the figure might not be so staggering for now. But the number of hybrid stores has been rapidly rising in recent months, according to E-Mart 24.

“After we announced the decision to expand hybrid stores in July, we have been rolling out the system. Nearly 80 percent of our stores are not open 24 hours a day,” one representative at E-Mart 24 said.

Boasting over 5,700 locations in total, the convenience store chain, operated by Shinsegae Group, saw the number of hybrid stores jump from some 150 earlier this year to around 700 as of late October.

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Meal kit or banchan stores — shops dedicated to selling ready-made meals and side dishes — have also been getting the automation treatment.

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“Our main target is married women in their 30s and 40s who are also working and part of dual-income couples,” a representative at Omealdang, an unmanned meal kit store chain, said.

With no need to hire shopkeepers, these stores are open 24 hours a day all year round.

“The ready-made meals are produced in factories and supplied (to stores) directly and be put on display and sold without having to be cooked in the store, which has been well-received by meal kit shop owners,” the representative added.

It was early 2018 when Amazon first unveiled its cashier-less Amazon Go to the public. Since then, South Korean businesses have also quickly adopted a similar concept in businesses ranging from ice creams stores to unmanned cafes and coin laundry services.

According to Shinhan Card, a leading card issuer in the country, credit card transaction volume at staff-free cafes saw a 50 percent year-on-year jump between August 2019 and January 2020, leaving behind franchise coffeehouses and budget cafes which saw a 5 percent and 24 percent jump over the same period, respectively.

The number of self-service laundries from six major companies also grew from 3,086 in 2016 to 4,252 in 2020, an increase of 37.8 percent, according to a report from the Korea Consumer Agency. Revenue also grew from 49.8 billion won ($42.1 million) in 2016 to 112.9 billion won in 2020.

The increase in numbers comes as the share of single-person households in the country also grew from 27.2 percent in 2015 to 30.2 percent in 2019, according to Statistics Korea. The figure rose to 31.7 percent in 2020, meaning that nearly 6 in 10 households are either single- or double-person households.

Lee Young-ae, a professor at the Department of Consumer Science at Incheon National University, said “price competitiveness,” “curiosity about something new” as well as “being able to shop quickly” have made unmanned stores appealing to consumers.

But for staff-free stores to last long-term, they will have to tackle issues such as security, the professor said.

“It could look like a lot of people are using these services because they did not exist before. But in the long run, customers could feel tired or confused if they are not given the information or services they need (at unmanned stores).”

How will the automation boom affect the job market?

Professor Lee Jung-hee at Chung-Ang University College of Business & Economy says demand for staff-free stores will continue to grow.

“We have already experienced the contactless age. And as (business owners) face issues such as labor costs and manpower management, staff-free stores present an alternative. I expect the demand for similar business models to continue to rise,” Professor Lee said.

Staff-free stores often appeal to prospective shop owners with their low initial costs amid growing labor costs.

A study from the Korea Economic Research Institute last year argued that many low-paying jobs were erased when the country’s minimum wage was increased by 16.4 percent in 2018 while those who were employed enjoyed higher pay.

In a survey conducted by the Korea Federation of Micro Enterprise earlier this month, some 87 percent of small business owners said they would have difficulties paying the minimum wage if it were increased for next year.

In an effort to help small business owners, the government announced the “smart supermarket” plan earlier this year — equipping hundreds of supermarkets with entry verification systems and self-checkout kiosks as well as security devices.

“This is a trend which cannot be stopped by the government. It could also create jobs in new fields such as solutions companies focusing on unmanned stores including kiosks and other automation systems. Low-skilled jobs are likely to disappear as a result.

“Rather than focusing on this specific trend, the government needs to come up with a comprehensive plan to address the issue of jobs (like cashiers) disappearing,” the professor said.