Since the launch of the shockingly cheap fried chicken set by Homeplus, a discount store retail chain in Korea, a fried chicken price war has swept the nation. Burdened by inflation, customers let out a sigh of relief to see the comeback of fried chicken as their go-to comfort food. Despite controversies about whether retail chains are muddying up fair economic grounds, the lowered price itself seems to be a sufficient justification for gaining the attention of customers bombarded by frugality.
In June 2022, Homeplus introduced a line of fried chicken called Dangdang chicken – its name signifying that the chicken is sold on the same day it is made – priced at 6,990 South Korean Won (KRW) per whole chicken. Since its introduction, other retail chains such as Emart and Lotte Mart have also joined in the hype. Numerous figures demonstrate the success of these extraordinarily cheap fried chicken products. On August 11, Homeplus announced they had sold 320,000 sets of fried chicken so far, which is approximately five whole chickens being sold per minute, according to The Joongang. Furthermore, as retail chains hope to garner profits by applying similar tactics, pizzas have become the next target for low-cost products. For example, Lotte Mart sold its “cheese and dough original pizza” at 9,800 KRW, which is 5,000 KRW less than the original price during the two weeks of September.
Why Retail Chains’ Fried Chickens are Popular
The popularity of retail chains’ fried chicken is undoubtedly credited to its price-performance ratio. Compared to the price of fried chicken sold by franchises, which usually amounts to over 20,000 won (including delivery fee), retail chains offer chickens at half their price. According to Bloomberg, fried chicken has shown a relatively rapid hike in food prices. For example, in July 2022, overall food prices have risen by 8.8 percent year-over-year, while fried chickens increased by 11.4 percent, presenting a comparatively higher escalation rate. The increased delivery fees during the coronavirus disease (COVID-19) period also added a burden on consumers and storekeepers. Beyond the price benefit, the quality of retail chains’ chickens has surprised many consumers considering its price. As reported by KBS NEWS, many vloggers and community users have praised the chicken’s tenderness and crispiness, some claiming that there were more pieces included in a set than expected.
The symbolic role of fried chicken also influenced the marketability of the product. Fried chicken has long been regarded as one of Korea’s comfort foods, and this has even led to the coining of the term Chimaek, which refers to the menu combination of fried chicken and beer. Chimaek is a Korean household meal enjoyed on varied occasions, from stress release after work to a simple afternoon munchie. Yet Chimaek has lost its distinguishing feature of being affordable, with inflation influencing customers to turn their backs on expensive fried chicken. Nowadays, fried chicken is no longer a go-to for Koreans. In this sense, retail stores have rightfully targeted Koreans’ desire to pay for fried chicken at a reasonable price, provoking nostalgia for “the good old days” spent with fried chicken.
Power of Retail Chains’ Structure
One might wonder why other franchises are not adopting the tactic of selling insanely cheap fried chicken. This is largely due to the management structure of retail stores. The main reason lies in their buying power, where retail stores buy raw materials such as chicken, in bulk at a low price, according to The Joongang. This step efficiently
lowers costs in the production process, which is reflected in the final price. Besides, retail chains possess their own infrastructures and facilities for cooking within marts, further discounting labor and intermediary transaction costs.
On the other hand, retail chains’ looming dominance over the fried chicken consumption pool concerns fried chicken franchise store owners. As retail chains still claim to profit even after selling products at half the original price, customers are becoming increasingly concerned over franchises on their relatively costly products. Yet, the fundamentally different business structure of retail chains and franchises renders the latter incapable of attempting the same strategy.
The essential reason for weak price competence lies in the commission imposed to store owners. First, the royalty fee for using the franchise brand is imposed on the storeowners. Additionally, store owners are required to pay the delivery people on top of the advertisement fees for using a food delivery application. Both fees are not calculated for retail chains, as reported by Chosun Ilbo. Other expense prove a comparatively heavier burden for store owners, such as rental, service fees, and labor costs. For instance, retail chains do not provide services like pickled radish and coke, permitting another cutback on costs.
Concerning the store owners’ claims, headquarters of franchises mostly remained silent, according to Maeil Business Newspaper. They seem to be keen on observing the market and deciding the next appropriate move. Nonetheless, Professor Lee Sang Seok (Hanyang University, Business Administration) explained that this fried chicken phenomenon revealed a possibility of a niche market, where fried chicken of a medium price range could emerge. Additionally, Professor Lee further forecasted that the current situation will act as a factor to hinder extra price growth for franchisors.
How the Consumers are Responding
Surprisingly, a similar situation occurred before in 2010 but with strikingly contrasting reactions. Lotte Mart introduced a 5,000 KRW fried chicken but was only met with criticism for destroying small businesses. The product was suspended in a mere 10 days, according to Hankyoreh. However, in 2022, retail chains are experiencing a sales boost, with criticism directed towards franchises instead. Professor Lee elaborated that both political and economic factors contribute to such a difference, as Lotte Mart was faced with severe backlash from the government in 2010 for its potential harm and the current inflation has augmented customers’ frustration of expensive fried chicken.
Customers have heralded retail chains’ launch of fried chicken at half the market price as a relief from the agonizing economic circumstances. Although the products turned out to be an appealing substitute for franchise fried chickens, indiscreet criticism towards franchise store owners should be refrained. Rather, Professor Lee emphasizes that this phase should be adopted as an opportunity to cast more social responsibility to franchisors, mending unjust management structure between franchisors and franchisees. Additionally, this unexpected success that discloses how customers are encumbered with economic tolls arising from inflation and heightened demand. The fried chicken case in the market industry once again proves price is still an influential factor for customers, especially during hard times. Fried chicken brings hope that there is still a product bought easily even with a slim wallet.