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Does self-employed business in Korea have a future?

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PART1. Does self-employed business in Korea have a future?

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Increasing self-employed business ...... the importance of livelihood-type self-employed business is overwhelming

According to the result of the ‘Survey of nationwide business entity’ of National Statistical Office, the number of self-employed business entity (private business entity) in 2013 was 2,986,641, accounting for 81% of entire number of business entity 3,676,867. Though the importance it accounts for among entire number of business entity is in the trend of being reduced to 81% until 2013 from 85% in 2006, that of self-employed business entity is being increased more each year from 2006 until 2013, except 2008.

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▶ Entry into self-employed business ...... money from start to the end Money Gloomy face of money

Though it is self-employed business started for better living, the reality is tough. According to the data of National Tax Service, the start-up of self-employed business for 10 years from 2004~2013 was 9.49 million, but 7.93 out of it were closed down. Comparing this with a simple value, the survival rate of self-employed business was 16.4%, which is the level of only 1 out of 6 start-ups surviving. Though several factors would complexly work in low surviving rate of self-employed business, I examined the reality through the data related to ‘money’ which accounts for the biggest part among such factors.  

First, with increasingly fierce competition among self-employed businesses economies of scale is being applied also to self-employed business. Even self-employed business available for start-up with small scale capital requires much money in order to survive competition. In 2015 the percentage of new self-employed businessman whose business funds is over 100 million won was 9.4% (National Statistical Office, ‘Non-wage work additional survey’). Not only the size of business fund got bigger but also the number of self-employed business having employees is in increasing trend. This trend means that with fierce competition in self-employed business the entry barrier into self-employed business got raised, entering into business with fund to some extent upon business start-up.

Second, the debt of self-employed businessman is being increased more and more. The increasing rate of self-employed businessman‘s bank loan was rapidly increased at the point of the end of 2010, recording the biggest increase rate of 14.4% in 3rd quarter of 2015 (Report of finance stability, Bank of Korea). The debt situation is also unyielding. Household debt amount of self-employed businessman was 9,392,000 won in average in 2015 (National Statistical Office, 2015 household finance welfare survey), recording 3.8% increase rate compared with previous year. This is very higher than regular employees (1.8%), temporary/daily-employed workers (-1.7%).

Third, no stable income is guaranteed even though when they start with debt. Looking into sale scale of self-employed businessman last year (National Statistical Office, 2014 company appearance and disappearance administration statistics), the case of below 50 million won accounted for 56.7%, beyond majority of entire respondents, and the case of 50 million ~ 100 million won also reached 14.6%. That is, self-employed businessman who recorded less than 100 million won sales accounts for 71.3%, showing the reality of petty self-employed business as it is. And according to the report of ‘The progress of income imbalance and implication of self-employed businessman household’ by Korea Economic Research Institute, the Gini coefficient of self-employed businessman (income imbalance index) rode increase trend since 2010, increasing to the level of 0.271 in 2014. As a value representing the relationship between population distribution and income distribution, Gini coefficient means that when it closes to 1, income distribution is in imbalance.

Also insufficient information required for self-employed businessman is a problem. 38.5% of respondents answered, saying “have no experience of getting information‘ to the question of asking for experience of acquiring information in ’small businessmen survey‘ by the Small and Medium Business Administration in 2013. Also that the data related to self-employed business are not generally managed in national level is a big problem. Actually, in order to check the data related to self-employed business, there is inconvenience of having to generally find the data announced by several institutions like Bank of Korea, National Tax Service, and National Statistical Office. And, as the time of survey or item division is different in each survey institution or survey, it is hard to generally use them. (National Statistical Office first officially disclosed statistics of self-employed business in December this year to respond to this problem as well as prevent indiscriminate entry into self-employed business, and said it is going to announce a general statistics survey material, which passed supplement course, at the end of next year.

 


PART2. Coffee shops in Seoul increased 37 times in 20 years

Coffee shops in Seoul is 13,938 in October this year ...... 1.1 times increased compared with previous year

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There are total of 13,938 coffee shops in Seoul in October 2015. In the meantime the number of coffee shops in Seoul repeatedly increased as years go by. It surpassed 1,000 with 1,017 in 2001 with 6.140 in 2010 and 10,972 in 2013, consecutively breaking 5,000 and 10,000 respectively. In case of ‘accommodation and food industry’ to which coffee shops belong, a representing livelihood type self-employed business with low entry barrier, the importance of self-employed business is high in average of 89.3% (2006~2013) among entire employees who are working on such industry are those working in private business entity. Looking into the development of opening/closing business status in each year, opening of coffee shops were first over 100 in a year in 1999. The number of cafeteria opened was greatly increased compared with previous year with 558 in 2003, 1253 in 2009, and 3454 in 2014. On the other hand, in case of closing business there were almost no coffee shops closed until 2001, unlike the development in opening, but starting in 2002 (12) such number gradually increased with 1,036 coffee shops closing in 2013. This development appears to be that the shops closed due to deepening of competition among coffee shops are increased, though many coffee shops are opened according to coffee shops business start-up boom.

 

Coffee shops in each autonomous district of Seoul ... Mapo-gu, Seocho-gu are overwhelming

What about the situation in each autonomous district? Mapo-gu had the most coffee shops (1,884) in October 2015, followed by Seocho-gu (1,338), Jung-gu (865), and Gangnam-gu (816). Mapo-su was an autonomous district which has had the most coffee shops among 25 autonomous districts since 1996. Gangbuk-gu was ranked in 2nd rank during 1996~1998, with Gwangjin-gu during 1999~2003, and Seocho-gu after 2004. In particular, Mapo-gu and Secho-gu breaking through 1,000 coffee shops within their autonomous districts at the turn of 2010, 2012 respectively, outstandingly differentiated from other autonomous districts.

And when looking into the development of opening/closing status in each autonomous district, Mapo-gu had opening of as many as 403 coffee shops during 2014 with each year increase from 2002~2003, with closing in big size as big as in closing. In particular, 233 coffee shops were closed in 2013, which equals to the most number among the number of coffee shops‘closing in other autonomous districts.  

Seocho-gu had increase of coffee shops starting from 2002 with 274 coffee shops opening in average a year during 2010~2014. Closing also shows the trend of gradual increase without big characteristics. And the change in Gangnam-gu is outstanding with 523 cafeterias opening in 2014, a rapid 3.5 times increase compared with previous year.

Beside insight for these autonomous districts we can approximately check the point when coffee shops are the vogue in each autonomous district, and we can see that it was during 2002~2003 in Mapo-gu, Secho-gu as above, with Yongsan-gu in 2013, and Nowon-gu, Gangseo-gu, Gangdong-gu, Jung-gu during 2009~2011.

Like this, when looking into the data about how many specific self-employed businesses open and close in each year, we can directly check detailed information about what kind of business type they are and what difference they show in each area. This is an essential information that those who want to start self-employed business should check before opening, and general understanding it through various data beside this becomes a basic foothold in order to survive fierce competition in self-employed business.

If you want to check the reality of self-employed business and the data about other businesses beside coffee shops, you can access to the site ‘50 years of rise and fall in restaurants in Seoul City’ (Clicking on banner at the bottom) for the details. 


 

data source- 'Raw data download' 

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