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By Yoon Ja-young
Convenience stores have long been selling ice cream products at prices as low as 350 won (31 cents) to attract consumers, but soon they will disappear from the freezers. Due to backlash from wholesalers who control over half of the ice cream product distribution in the market, convenience stores will scrap the low-price promotions.
According to the Hankook Ilbo, the sister paper of The Korea Times, CU, GS25 and Seven Eleven ― Korea's top three convenience store operators ― have decided to end the promotions.
Before the decision, consumers were offered certain kinds of ice cream for 350 won each if they bought 10 or more in a single purchase at CU, which is a 65-percent discount from the regular price. Seven Eleven also offered up to 65-percent discount, through a one-plus-one promotion for consumers using certain mobile payment services.
The production cost of ice cream bars at factories is known to be around 250 won per item, and the convenience stores are known to purchase them at between 300 and 400 won per item, after retail giants negotiate deals with ice cream makers. As the prices are determined by the retailers, not the makers, under the “open price” system, convenience stores chose to sell ice cream at almost no profit, using them as a kind of bait to entice customers into their stores. People who drop by a convenience store to buy cheap ice cream often end up buying other products ― such as coffee, snack foods and alcoholic beverages.
Self-service ice cream stores, which have increased in number over the past few years, also prompted convenience stores to lower the prices further. These self-service ice cream stores, which can cut costs, as they do not incur labor costs and don't have major concerns over unsold inventory, due to the long shelf life of frozen products, have raised a challenge to convenience stores.
Increased competition was good for consumers as prices were kept low, but aggressive marketing, which pulled down prices to below the previously set record of 400 won, met with a strong backlash from wholesalers, who account for over 60 percent of ice cream distribution. Wholesalers buy in bulk from factories and supply the products to supermarkets or ice cream stores. Due to pressure from wholesalers, ice cream companies have shifted to a negative stance on the convenience store pricing, eventually leading to the end of low-priced ice cream promotions at these stores.