Gyeonggi Research Institute: Local Currency Payment Increase Drives 57% Additional Sales Growth for Small Merchants

[Suwon Ilbo=Reporter Park No-hoon] The Gyeonggi Research Institute released a report analyzing the impact of local currency on sales of small merchants in Gyeonggi Province (comprehensive data for Q1-Q4 2019), revealing that when local currency payment amounts increase, small merchant sales rise by an additional 57%. The institute also announced that the sales difference between stores with increased local currency payments (based on 1 million won) and those without is 5.35 million won.

According to Gyeonggi Province on the 16th, Gyeonggi Local Currency, which was fully implemented in April 2019, shows a continuous upward trend in both issuance and usage amounts (analysis focused on card-type local currency based on the Kona I Platform DB; Gimpo, Seongnam, and Siheung cities, which do not operate this system, were excluded).

Gyeonggi Local Currency usage was 46.6 billion won in Q2, 101.8 billion won in Q3, and 131.5 billion won in Q4, with the usage-to-issuance ratio steadily increasing from 56.5% in Q2 to 85.5% in Q3 and 88.9% in Q4.
The report also includes survey results covering approximately 3,800 businesses across four quarters of 2019 to analyze the sales impact of Gyeonggi Local Currency on small merchants.
Average monthly sales per store by quarter improved from approximately 16 million won in Q2 2019 to approximately 18 million won in Q4. Total Gyeonggi Local Currency payments increased from 730 million won in Q2 to 950 million won in Q4, while the number of participating stores rose from 1,773 in Q2 to 2,061 in Q4.
Using panel analysis with random effects models to estimate sales increase effects, stores with local currency customers showed a 2.06 million won increase in sales compared to those without. By period, periods with local currency payments showed a 1.15 million won sales increase compared to periods without.
Analyzing effects between stores, stores with local currency payment experience showed 4.75 million won higher sales than those without. This stems from a local store discovery effect, whereby due to the nature of local currency—which can only be used within the region—customers continue to patronize neighborhood shops they previously did not use. For example, as local currency users discover such stores exist in their neighborhood and continue to visit them, overall sales increase.
When local currency payments within the same store increase by 1 million won, sales increase by an additional 570,000 won. Between stores, shops with 1 million won higher local currency payments show 5.35 million won higher sales compared to those with lower payments.
Examining the regional impact of local currency sales increases, the effect appears greater in the less developed northern and central-inland regions compared to the more prosperous southern region of Gyeonggi, which has large metropolitan areas. This indicates that local currency shows positive effects in terms of regional balanced development, according to provincial officials.

Ryu Young-sung, head of the Basic Income Research Division at the Gyeonggi Research Institute, stated: "These research results demonstrate that Gyeonggi Local Currency, with both issuance and usage amounts continuously increasing, is undeniably having positive effects on increasing sales for small merchants."