The Korea Local Administration Review

The importance of the location choice of retail stores has been well documented for several decades. The recent proliferation of e-commerce and the high store closure rate in Korea, however, raise a question whether off-line retail store locations still matter. Several relevant empirical studies have been conducted in Seoul Metropolitan Area (SMA). However, little is known for small-towns and the changes in their associations.
This study aims to fill the gap by examining the relationship between the homogenous and heterogenous spatial concentrations of local retail shops and their survival rate in small town, Gangneung, South Korea. Specifically, we utilized multi-year retail stores data (i.e., 2000-2019) and survival analysis to investigate how the associations between the spatial characteristics of retail stores such as retail store density, Marshallian specialization, and Jacobian diversification and their survival rates changed between 2000s and 2010s.
The key findings are as follows. Although the retail store density has a positive association with the store survival rate in both time periods, the magnitude of the association reduces significantly over the past decade. The homogenous concentration of retail stores also shows a positive relationship with the retail store survival rate over 20 years with a larger magnitude in 2010s compared to 2000s. This result supports the importance of clustering of the same type of retail stores, thereby the importance of location. On the other hands, the results showed the negative relationship between spatial diversification and the store survival rate. In sum, the results imply that there are positive agglomeration economies within the same retail type while negative agglomeration economies between the different types of retail exist in a small town in South Korea. Similar to the proved localization economies within industries in small towns, it can be assumed that the clustering of the same type of retail stores could enhance local characteristics by effectively informing consumers and facilitating knowledge sharing, labor skill matching, labor pooling, and intermediate input sharing.