Amid an increasing number of self-employed presidents closing their businesses due to sluggish domestic demand, fintech company Pinda is actively working with the government to “save their presidents.” According to the Pinda survey, starting a business without proper information was identified as the main cause of closure, and it is trying to reduce the closing rate by analyzing the commercial area with artificial intelligence (AI) technology to provide more information to bosses.
In fact, according to the National Statistical Office, the number of self-employed people in Korea has recently declined rapidly, reaching 5.5 million in January this year. This record is equivalent to the COVID-19 pandemic, which is smaller than in 1997 (5.9 million), 1998 (5.61 million), 2008 (6 million), and 2009 (5.74 million) during the global financial crisis.
The restaurant industry, which is said to have the largest number of self-employed people, was also directly hit. According to FinTech company Pinda’s AI commercial analysis platform OpenUp, out of 818,867 restaurant companies in 2023, 176,258 companies closed their businesses, with a 21.52% closure rate. One out of five locations closed, up about 82.6% from 2020 (96,530) when the COVID-19 was the most severe.
In addition to the overall economic downturn and high prices, the so-called “blind start-up” behavior of jumping into a business or opening a store without accurate information on location and commercial demand is cited as the cause of the rapid deterioration of the self-employed environment, such as an increase in the closing rate compared to the COVID-19 period.
In fact, according to a survey of 1,840 open-up users conducted by Pinda in May, “failure to select a location industry” (25%) was the number one reason for those who have closed their stores. When asked about the operating period of closed stores, more than half (52.0%) said it had been less than three years. The percentage of presidents who answered “more than 1 year to less than 3 years” was the highest at 42.1%, and about 1 in 10 (9.9%) answered “less than 1 year”.
Four out of five (80.8%) of the presidents who closed their businesses are willing to re-start their businesses, but most of them were not prepared for commercial district analysis and location selection. Only 15.1% said they had finished selecting the best commercial district and location, while 44.1% said they had not made a final decision. 29.3% of the respondents said they had just begun to grasp the commercial district and location, while 11.5% said they were not prepared at all.
As the pain of self-employed people grew day by day, the government and private companies also stepped up. Since the beginning of this year, the Ministry of SMEs and Startups has been in charge of the “2025 Re-commercialization of Hope Return Package” with the Small Business Market Promotion Corporation. The plan is to provide one-stop support for the rapid closure of small business owners who cannot even close their businesses, while helping them find employment as wage workers in a stable manner or re-enter the self-employed market with proper preparation.
Pinda also participates in the “AI Re-Startup Diagnostic Report” service, which integrates on-site diagnosis and analysis of start-up business areas based on open-ups to help small business owners who have already closed their businesses or are about to close their businesses. When a small business owner participates in a diagnostic survey for re-startup, AI analyzes the estimated start-up cost and average monthly sales by combining information on shopping malls and nearby commercial districts to which the start-up is scheduled.
Hwang Chang-hee, general manager of Pinda OpenUp, said, “Although location selection determines the success or failure of start-ups, there were many self-employed people who suffered from a lack of related data due to severe information asymmetry in the start-up market. Based on Pinda’s AI and big data capabilities, we want to take the lead in helping more small business owners come back and contribute to lowering the closing rate.”
[Reporter Lee Hojun]
