Sunday, Dec 17, 2017
Others | Asia-Pacific | South Korea

BGF Retail

CU: more than just a convenience store


1 year ago

Seok-Joh Hong, Chairman of BGF Retail
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Seok-Joh Hong

Chairman of BGF Retail

BGF Retail operates the largest network of convenience stores in South Korea through its CU brand. Its Chairman, Seok-Joh Hong, expands on his vision for the network of 10,000 CU stores to become an indispensable part of the daily lives of Koreans throughout the country, and hints at plans for expanding the uniquely Korean convenience store concept overseas.

 

In the face of global economic problems such as the slowdown in emerging markets and turbulence in the eurozone, the government has identified that it must stimulate internal demand. How do you assess the potential of the retail sector to emerge as a strong future growth engine of the Korean economy?

As you know Korea has been very successful in terms of rapid growth, based on its exports and manufacturing sector. The retail industry did not play a major role in our impressive development. However, the retail industry has been growing considerably since 2000. We are adapting to the changes in society faster than any other industry.

Korea is an IT powerhouse and internet penetration is extremely high. We now have to find the most effective ways of incorporating IT advances into our sector. IT gives us the power to change the lifestyle of our customers and change the entire structure of the industry.

In short, I believe the retail sector can help to offset the weaknesses in the manufacturing sector. With the advances taking place in IT, we can really be a catalyst for change in consumer habits this country. Even though my company is relatively small in terms of the bigger picture, I want us to contribute more to these changes.

 

How do you see the role of convenience stores in Korean society evolving in the coming years?

This year my company reached a milestone of 10,000 stores in Korea. I think we should be more than a store. This is not just a store where you can purchase groceries. Rather, I think CU stores should provide a wide variety of products and services. I want CU stores to become indispensable to the daily lives of everyone. Our definition of a convenience store is a ‘daily life platform’. Right now, each store is a dot. We want to connect these dots to become a line, a network. This entire network of 10,000 stores can become an organic being that is meaningful to our clients.

In terms of physical space, we really want to change the stores to meet the needs of our customers. For example, if our convenience store is in a busy part of the downtown area, we can provide storage services. If it is near to a women’s university, we can provide make-up rooms or fitting rooms. If it is near an urban park, maybe we can also provide performance areas. We don’t want our physical space to be isolated from the surrounding area. Rather, we want to provide a very useful space to meet the needs of our customers. I repeat, we want to be part of the daily lives of our customers. This is our goal, and in some parts of the country we have already started making changes in this regard.

 

Earlier this year, BGF Retail announced new corporate identity, “Be Good Friends”, together with a plan to deepen its commitment to corporate social responsibility. How does this new identity correspond with your vision of making CU stores indispensable to the daily lives of everyone?

We want to contribute to our society by serving as part of its social infrastructure. This means that first of all, the people who run the stores and work in the stores can earn a stable income. For the customers who pursue reasonable consumption, we provide a place where they can find and purchase products for an affordable price, 24/7. We believe that we have a certain social responsibility to our franchise owners, employees and customers. We really want to become ‘best friends’ with them all.

We have a program that aids business ownership for the socially neglected and underprivileged called ‘CU Sprout Store’. CU Sprout Store is a CSV (creating shared value) model that supports employment and incubates business startups for the underprivileged by using our stable and professional membership enterprise system. All the profits from the CU Sprout Store are used to further support employment and startup business capital.

We are operating 24/7, so we have a certain social responsibility. For example, women who travel home late at night may feel unsafe. They can get help from these 24/7 stores. In collaboration with the local police, we provide this kind of security for women. In agreement with the Ministry of Public Safety and Security, we have stored certain relief aid in our logistic centers across the country. If there is a disaster in a certain area, the disaster relief will be immediately delivered.

We also work with UNICEF to collect coins in our stores. We have collected 500 million won so far, which we as a company have matched. This matching fund, along with the coins collected at the stores, will be delivered to Vietnam for construction of public libraries.

 

The Korean economy has been traditionally dominated by a few conglomerates, with SMEs lagging behind in terms of productivity. How do you assess the impact of BGF Retail on Korean SMEs supplying your network?

We offer 3,000 different items in our stores. In terms of sourcing the products and ready-made meals, there is no question that we rely on SMEs. We have created a 10 billion won co-existence and co-prosperity fund in cooperation with the SMEs. If you want to supply your products to our company and stores, we can visit the company and then provide and explain the procedure and requirements. If a company wishes to develop new products with us, we can gladly accept constructive suggestions and cooperate.

We put high emphasis on co-prosperity with SMEs. We are not pursuing short-term profits. Rather, we want to become long-term partners with SMEs. If our company has a good reputation, new SMEs will want to be long-term partners with us. We pursue that kind of partnership. Most SMEs have insufficient marketing and distribution channels. We provide useful information and professional support through conferences and an e-learning website. We really want to work hand-in-hand with these SMEs.  

 

At the moment your retail footprint is confined to Korea. Can you expand on the potential for regional or global expansion of BGF Retail through the CU brand?

When we became independent from the Japanese company four years ago, we did this with overseas expansion in mind. If we do so, we want to establish our brand in certain countries steadily and for the long term. So, we are seeking partners that have the same management philosophy as us.

CU is the number one convenience store brand in Korea. We really want to become number one in any other country we enter and we want that to happen within a short period of time.

Convenience stores started in the United States, but now the Japanese version is very popular. Likewise, Korean pop culture and the Korean Wave are sweeping the entire world. We want to become the Korean version of a convenience store. Along with that, we really want to localize our convenience stores so that we can meet the needs of local people.

 

When considering overseas markets for expansion, are you looking initially at neighboring countries, or even further afield?

The geographic proximity is the second matter that we need to think about. We are seeking a market that considers our country or our brand favorably, and a country where we can be most competitive. Basically, we need to be successful in the first country we enter. That is why we are very cautious when it comes to overseas expansion. 

 

Earlier you mentioned the global popularity of Japanese convenience stores, and how you to want to be known as a Korean convenience store. In your opinion, what’s the difference? How can a Korean convenience store positively differentiate itself from a Japanese one internationally?

Korean convenience stores are basically derived from the Japanese. We have many things in common. However, Japanese convenience stores focus on products and service only. We are very much interested in the physical space in terms of supporting our customers’ lifestyle. We want to expand our services and products based on this spatial nature by analyzing Big Data and researching consumption trends. The nature of the Korean convenience store is rapidly evolving, adapting to the changes in society and culture. That’s one thing that differentiates it from a Japanese store.

 

Away from the CU brand, can you expand on any plans you may have to diversify BGF Retail’s business portfolio?

As a businessperson it is only natural that I’m interested in diversifying our portfolio. We have plentiful cash resources. We want to enter an area that we know well, and that we can succeed in. I cannot say when we will do this, but we are reviewing certain proposals right now. We aim to leverage on our existing network and advantages.

 

You are one of Korea’s wealthiest and most successful businessmen, yet you talk to the media very rarely. How would you sum up your personal vision, motivations and ambitions?

I worked as a prosecutor for 25 years. Before I retired from the prosecutor’s office, I never imagined I would become a businessman.

I do not do this to satisfy personal ambitions. My objective is to set the direction for the entire company. I want our company, and subsidiaries and affiliates, to provide a warm light to society. It comes from the word ‘Bo Gwang’. ‘Bo (普)’ means widespread, or road. And ‘Gwang (光)’ means light. My father, the founder of this company, wanted to provide warm and beneficial light to the entire society. That is the founding mission of this company. I want to contribute to that mission. 



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