By Kim Tae-gyu
E-Mart, the country’s largest discount chain, said earlier this week that it will freeze or cut prices of 52 essential items such as some instant noodles, dairy products, powdered formula and vegetables this year.
The price tags of pork and beef will also be slashed despite the shortage of supplies in the aftermath of the foot-and-mouth disease outbreak, which has caused the culling of more than 3 million domestic animals here over the past few months.
The Seoul-based retail giant said it will maintain the policy for some time in order to help Asia’s fourth-largest economy tame rising inflationary pressures across the country.
The measures seem to be “inspired” by the government, which has been urging retailers to cut prices as it grapples with inflation although E-Mart denies this.
E-Mart, a perennial business bellwether with 135 outlets across the country, is also a flagship subsidiary of the Shinsegae Group together with Shinsegae Department Store.
As other main discount chains of Homeplus and Lotte Mart may follow suit, a couple of questions occurred to this reporter regarding whether the maneuver would come to the rescue of the incumbent administration.
First of all, ordinary people will welcome the steps. But who will take the losses for the discounts — E-Mart or suppliers? Although E-Mart says that it will not burden suppliers, few are buying this answer.
Enterprises basically are all about making money and with its operating profits jolted last year, will E-Mart accept the discounts at the cost of its own bottom lines, not those of its suppliers? I don’t think so.
And what if the retailer raises prices for other products in a smart way unbeknownst to clients to maintain profitability; this would be tantamount to a confidence game.
The other question is whether E-Mart will be able to provide a sufficient amount of discounted items, whose values are seemingly set below the market norms for some of them.
When contacted, an E-Mart spokesman said that it plans to limit merely the amount of pork due to the lack of supply. But other highly-discounted items are also feared to run out leading to a failure to fully meet the demands of shoppers.
Then, E-Mart may come under criticism that the outfit lured customers through using the discount as bait.
In the face of the above-mentioned doubts, E-Mart might feel unfairly targeted as the company stepped up to help the incumbent administration’s all-out efforts to curb inflation.
It may be right. Fundamentally, all the messes are created by today’s ill-fated policies of attempting to twist the arms of retailers to fight inflation. Instead, Korea can just reduce overly rich liquidity.