Korea: e-commerce trailblazer
Last week I visited the 5th ecommerce country in the world: South Korea. After China ($ 1,526 billion), the United States ($ 535), United Kingdom ($ 123) and Japan ($ 109), according to eMarketeer (December 2018), Korea is the fifth-largest e-commerce country in the world with online sales of $ 78 billion. That accounts for 22.2% of all retail trade, making Korea the third country in the world, after China (35%) and the UK (22.3%). According to Euromonitor International (EI), South Korea is even the first country in the world: they estimate the ecommerce share of all retail sales in 2018 at around 24% net, a fraction larger than that of China (almost 24%) and the UK (16.5%).
Ecommerce is big in South Korea
Some more statistics: e-commerce retail is growing this year in South Korea by 11.1% (China 30.3%) and 62% of all e-commerce turnover is realized through m-commerce (China 78.8%, the United States 39.6%). The largest platforms where mobile buyers have made mobile purchases: 11Street (57.7%), Coupang.com (51.6%), Gmarket.co.kr (46.7%), Wemap (44%) and Naver Shopping ( 42%) (source: Nasmedia, April 2018).
Ecommerce is big in South Korea. EI predicts that South Korea will be the third largest ecommerce country in the world after China and the United States in 5 years thanks to tech-savvy consumers and a well-developed internet infrastructure.
South Korea’s largest ecommerce company is Coupang. Set up in 2010 as a social media company, it quickly transformed into an open marketplace for buyers and sellers. In 2014, it launched its own fulfillment and distribution service, Rocket Shipping. Some 2 million products are delivered every day, ranging from consumer electronics to fresh products. At the same time, Coupang is South Korea’s largest shopping mall with around 5 million products, over 100 fulfillment centers. Besides, with 25,000 people (5,000 of whom are women) working directly and indirectly for Coupang, it is one of the largest employers in the country.
In the red
But just like most ecommerce companies in South Korea, the only nine-year-old Coupang is struggling to be in the black. Although more than 50 million Koreans have downloaded the Coupang app and sales grew to nearly $ 5 billion in nine years in 2018, the high fixed costs of thousands of delivery people and more than 100 Coupang fulfillment centers are a heavy burden. In 2018, a mega loss of $ 1.7 billion was incurred, which led to a major cash injection from Japanese investor SoftBank. According to Coupang CEO Jum Beim-seok, there’s nothing to worry about. “We have pushed for massive investment to impress our customers,” so said the CEO in April of this year in Inside Retail Asia.
While the ecommerce share in South Korea is growing fast, a continuous price battle and the fight for fast deliveries both push many web stores in the red. Only eBay seems to escape unscathed. Of all the major online shopping malls and market places in South Korea, only eBay is operating in the black. With the Auction and Gmarket sites on the market, eBay limits itself to connecting buyers and sellers and need not invest in logistics and distribution.
Korea in brief
Supplier SSG.com has just launched the ‘dawn delivery service’: the delivery of fresh products between midnight and 7 am. Organic fresh products in particular are delivered in the early hours in recyclable bags that are placed outside by customers. The bags keep temperatures low for at least 9 hours.
South Korea is the 10th country for mobile payments. Around 36.7% of digital buyers paid with mobile (China 81.4%, Denmark 40.9%). It is therefore the third country in the world (source: eMarketeer, October 2018). According to Nasmedia Naver Pay (58.6%), the app Kakao (49.1%)- originally an instant messaging app – and Samsung Pay (32.55) are the largest players in the field. To give you an idea, almost one third (19 million) of all 60 million Koreans regularly pay with the Kakao app and over 40 million Koreans regularly use the instant messaging app installed on their mobile phone.
Naver: Google from South Korea
Not Google, but local player Naver is the South Korean favorite where search and navigation are concerned. Naver, founded in 1999, has a market share of 74.7% with more than 40 million registered users and almost 30 million daily users (2017 figures). Dubbed the ‘Google of South Korea’, it offers search as well as a marketplace, things like news and entertainment and, as mentioned, the online payment services from Naver Pay.
Amazon and Alibaba
Amazon and Alibaba have a modest market share in South Korea, coming from cross-border purchases by Koreans, in other words: outside Korea. Amazon and Alibaba still do not sell directly in Korea. Just as in many European countries, the focus is on the development and expansion of tech giants elsewhere in the world (Alibaba: inland China, Amazon: US, India). Korean brands are strongly encouraged to sell products (Amazon via Global Selling) in the rest of the world and China (TMall Global).
Sources: eMarketeer, Financial Times, Nasmedia, Inside Retail Asia, Euromonitor International (EI), Wikipedia, Coupang, SSG.com, blog by Chandler Nguyen and all the information I learnt during my visit to Seoul, including the Retail Future & Innovation Forum 2019, on 16th November 2019, in preparation for the next Shopping Tomorrow study trip scheduled for 5-12 September 2020.
© 2019 Copyright Wijnand Jongen