Malaysia becomes preferred destination for Korea’s convenience chains

South Korea’s major convenience store chains are rushing to enter the Malaysian market.

E-Mart 24, the convenience chain operated by Shinsegae Group’s E-Mart Inc., opened its first overseas store on June 22 in Bangsar South, Kuala Lumpur, Malaysia. E-Mart 24 will also consider options to enter Indonesia and Vietnam.

Shinsegae’s E-Mart 24 entered Malaysia through a master franchise agreement with a local partner, United Frontiers Holdings Sdn. Bhd. (UFH).

In a master franchise relationship, the franchise brand owner like E-Mart 24 grants its partner the right to recruit new franchisees in a specific region and transfers know-how on the franchise's operation. The franchise brand owner receives regular royalties in return.

E-Mart 24 and UFH will open another 10 stores within 2021 and will create a total of 300 stores in Malaysia over the next five years.

The E-Mart 24 Bangsar South branch has installed more than 10 tables within its 260 square-meter space, allowing up to 40 customers to dine in. Popular Korean snacks such as Tteokbokki (spicy stir-fried rice cakes) and Dakgangjeong (Korean-style spicy fried chicken bites) will be offered at the branch.

“We localized as much as we could, considering the fact that Malaysians mostly eat meals out rather than at home,” said an E-Mart 24 representative.

E-Mart 24 is the second Korean convenience store brand to enter Malaysia after BGF Retail’s CU, the largest chain in Korea with more than 14,900 stores.

CU entered the Malaysian market in April through a master franchise deal with the number two player in the country, myNEWS Holdings Bhd., which operates more than 600 myNEWS.com convenience stores. The market leader in Malaysia is 7-Eleven.

According to CU’s data, the biggest revenue generator among all items sold at its first Malaysian branch located at the popular Centerpoint mall in Kuala Lumpur was Tteokbokki. CU added that 36% of the branch’s total revenue came from Korean snacks such as Tteokbokki, chicken and Korean-style fish cakes.

CU plans to open 50 stores in Malaysia in the next 12 months and a total of 500 stores over the next five years.

South Korea’s convenience store officials say that Malaysia is an attractive market due to its fast urbanization and high income, having the third-highest GDP per capita in Southeast Asia with $11,000.

They also highlight that demography is also another attractive factor. People aged between 20 and 39, the main customer group for convenience stores, make up 35% of the country’s total population.

“We will win the competition against the major global brands in the region using CU’s unique business model and operations already tested in the South Korean market,” said Lee Keon Jun, the chief executive of BGF Retail. 

Write to Yoo-chung Roh at yjroh@hankyung.com
Daniel Cho edited this article.