Koreans who want to oust the president are "getting a discount by inviting friends to click" online | Focus Analysis

Written by Hu Yiting

Edited by Yuan Silai

The sudden imposition of martial law after 40 years has ignited the political situation in South Korea. Later, the opposition party member Lee Jae-myung climbed over the wall to enter the National Assembly. The South Korean National Assembly passed the resolution proposed for the second time, and the presidential position of Yoon Suk Yeol was immediately suspended, making him another South Korean president who failed to escape the "Blue House curse".

While South Korean people are gathering and protesting near the Seoul National Assembly, waving K-POP glow sticks, their online shopping is also quite popular.

Data from Grand View Research shows that the transaction volume of the B2C e-commerce market in South Korea has reached a historical high, reaching 108.8 billion US dollars in 2023, making it the fourth largest e-commerce market in the world. It is expected that the revenue of the B2C e-commerce market in South Korea will reach 204.2 billion US dollars by 2030, with a compound annual growth rate of 9.4% from 2024 to 2030.

Behind the rapid growth of the e-commerce economy is the high familiarity of South Korean netizens with the Internet. According to the survey data of Statista in June this year, the total number of Internet users in South Korea is approximately 47.75 million, with a penetration rate of up to 97.4%.

In this land with a total population of only over 50 million, many local e-commerce platforms have emerged and still occupy a dominant position in the market. Among them, Coupang, Gmarket, 11 Street, and Naver Shopping are at the forefront, selling electronic products, household items, groceries, fashion clothing, and other goods.

In recent years, platforms such as Temu have entered South Korea and topped the list of newly added App downloads in South Korea in September, trying to share the market with AliExpress, which has been rooted for many years. At the same time, the trend of low-cost consumption is also sweeping the local area, becoming an advantage for Chinese platforms.

Local E-commerce Has a Deep Root

A survey by HSBC in Shanghai and Hong Kong in September this year shows that the proportion of online shopping in South Korea reaches 72%, ranking first in the world.

This is a market with great consumption enthusiasm. Since the 1990s, Lotte Department Store started selling thousands of products in South Korea through the Internet earlier, followed by Gmarket and Coupang.

Gmarket was established in 2000 and is a subsidiary of the online auction company Interpark. Since its launch, it has quickly attracted a large number of users with its relatively novel online shopping model and interface, and in 2006, it became the first South Korean online company listed on Nasdaq.

In 2009, eBay recognized the user scale and volume of Gmarket in South Korea and acquired it for approximately 1.2 billion US dollars. One year later, Gmarket's turnover has reached 4.7 trillion won, and the number of registered members exceeds 20 million.

Since 2015, Gmarket has started to launch the membership service Smile Club and opened a same-day delivery center to improve logistics efficiency.

The logistics race of South Korean e-commerce platforms has thus begun.

In 2016, Coupang was established. At the same time, according to foreign media reports, it has realized the importance of improving the delivery efficiency of goods and has continuously increased investment to equip multiple logistics centers, and gradually established a logistics network that is only 10 minutes away from 70% of the South Korean population, facilitating the last-mile delivery. On this basis, Coupang has also launched the "Rocket Delivery" service for next-day delivery and the "Rocket Cross-border" service for cross-border goods from the US to South Korea to be delivered within a week.

According to The Korea Bizwire, since its establishment, Coupang has invested a total of 6.2 trillion won (approximately 4.28 billion US dollars) to strengthen the logistics network in South Korea. In 2023, its annual transaction volume (GMV) exceeded 9 trillion won, and the number of platform sellers has exceeded 210,000.

This logistics competition is still continuing to this day. This year, Gmarket has reached a cooperation with the logistics company CJ Korea Express to launch the next-day delivery service "Star delivery", which will cover a total of 150,000 products in nearly 14 product categories, including small items such as daily necessities and kitchenware, and large items such as household appliances. The platform promises to complete the delivery of goods by the second day after the customer's requested date at the latest.

Even though they were established early and have strong strength, Coupang and Gmarket still need to engage in low-price competition following the wave of economic downturn after the epidemic.

Coupang launched a paid membership event. For example, from October to November this year, it launched the "Wow Big Sale" event. About 800 brands on this platform participated, with discounts of up to 70% on popular products such as fresh produce, home appliances, food, beauty products, and daily necessities. There are also promotions such as "One-Day Big Sale", "Brand Big Sale", and "Rocket Direct Purchase".

Gmarket is even more determined and eager to attract new users. This year, it announced that it will spend 100 billion won to hold the biggest discount event of the year, Big Smile Day. This event invests 70 billion won in price discounts such as coupons and discount cards, and the product discount scale is 65 billion won, which is nearly half higher than before. In addition, Gmarket has also reduced the annual membership fee from 30,000 won to 4,900 won, a reduction of up to 84%, and extends the membership for one year free of charge for all new subscribers.

Currently, Gmarket has also followed the local platform 11Street to launch low-price store sections such as "9900 won stores" to sell daily necessities. When the concept of South Korean young people changes from "You Only Live Once" to "You Only Need One", all platforms are inevitably involved in the whirlwind of low-price competition, either actively or passively.

Entering the Local Market with Low Prices

When low prices swept through South Korea, AliExpress was already in it, and platforms like Temu, known for their low prices, entered the market at a fast pace and began to seize the market like lightning.

As early as 2018, AliExpress officially entered South Korea. In the following years, it has continuously exerted efforts in aspects such as logistics distribution and market promotion, including jointly launching a 5-day delivery dedicated line for China-South Korea cross-border packages with Cainiao; relying on the warehousing facilities set up in Shandong Weihai, Yantai and other places near Seoul, it can also enable packages in some areas of South Korea to be delivered within the fastest 3 days (within 72 hours).

In addition, AliExpress has also signed contracts with local leading logistics companies in South Korea such as CJ Logistics, Hanjin, Lotte Global Logistics, and Korea Post to complete local deliveries.

In terms of market promotion, AliExpress has also increased investment. After officially signing the South Korean national-level actor Ma Dong-seok as the market spokesperson last year, it announced this year that the actor Tang Wei and Ma Dong-seok will jointly endorse to enhance brand awareness.

Spokesperson poster, courtesy of AliExpress

Currently, AliExpress is accelerating its growth in South Korea, and the trend of surpassing local platforms is emerging.

Data from Wiseapp Retail Goods shows that the monthly active users (MAU) of AliExpress in March this year have reached 8.87 million, with a year-on-year growth of 114%. The user scale has surpassed the local e-commerce giant Gmarket and 11st for the first time, becoming the second largest e-commerce platform in South Korea after Coupang. This is also the first time that an overseas platform has appeared in the top three e-commerce platforms in South Korea.

Compared with AliExpress, Temu came a little later, but the layout speed is not slow.

In July 2023, Temu officially entered South Korea, using a similar strategy to make a name for itself - overwhelming preferential activities and large-scale advertising investment.

In the initial stage, Temu generously issued coupons such as "Register to get 300,000 won (230 US dollars) for free", and placed a bouncing character on the top of the homepage, telling users that the price of the goods has been reduced by 90% of the original price, and promising unconditional returns within 90 days.

In order to expand the user scale, Temu follows the "social fission" model, guiding users to invite friends to register through points exchange and gifts.

Thanks to various forms of promotions, Temu is growing rapidly.

Data from data.ai shows that after only three months of entering South Korea, Temu's download volume has ranked first.

This year, Temu will still increase its investment in South Korea. In February, the parent company of Pinduoduo officially registered and established a Korean legal entity named "Whale Co., Korea Limited", which will be responsible for e-commerce and related activities in South Korea.

According to Yonhap News Agency, it has continuously ranked first in the list of newly added App downloads in June and July this year.

Low prices and promotional products boost growth. For Chinese platforms, this may be the best time for AliExpress, Temu, etc. to deeply enter the South Korean market with obvious characteristics of monopoly by giants.

At present, South Korea is not only involved in the impeachment turmoil, but the current situation of high prices and high interest rates has not yet improved. Choosing a more conservative consumption method to get through the economic downturn cycle with a sharply increased uncertainty has also become a necessary choice for the majority of South Koreans.