Author: Seongyoon Heo(Chung-Ang University), HyunJoung Jin(Chung-Ang University)

This study visits a recent issue in the offline distribution market. Specifically, we analyze the effects of hypermarket closing on sales in nearby local shopping districts. We looked at the Lotte Marts in Dobong and Guro districts that closed in November and December 2020, respectively. Local shopping areas neighboring these closed stores were taken as the treatment group, and the commercial districts near the Lotte Mart locations in adjacent districts in Dobong and Guro branches were taken as the control group for a difference-in-differences analysis. Findings indicate that the closing of these hypermarkets led to an immediate decline in sales at nearby local businesses within a 2 km radius, with an overall decrease of about 5.3% in sales, decomposed as a 5.0% drop in weekday sales and a 7.8% fall in weekend sales. Mom-and-pop stores experienced a 7.5% sales drop, and the number of transactions decreased by 8.9%. Traditional markets and developed commercial districts also saw changes in sales, but these were not statistically significant. The study’s conclusions remain consistent across various analytical models. Further analysis revealed that the decline in sales in the surrounding districts was due to a decrease in foot traffic following the closing of the larger retailer. These findings offer new insights into the dynamics between hypermarkets and small, local stores, highlighting the need for new strategies to ensure the survival of conventional retail in an era of growing online sales.