In Korea, e-commerce exports continue to lag

For an economy built on exports and tech-savvy giants like Samsung Electronics, Korea’s widening trade deficit in e-commerce is a sore point that has caught the government’s attention.

While the nation boasts Internet connection speeds that put the United States to shame, and broadband reaches more deeply than in any other country, outdated security protocols on Korean websites crimp online sales to customers abroad.

The deficit has grown threefold since 2010 as Amazon makes inroads from Seoul to Busan, and local retailers and manufacturers fail to reach overseas markets on the web.

Korea’s $685 million deficit contrasts with a record $1 billion surplus for the United Kingdom, the global leader in exports of goods purchased on the web, data from the government in Seoul and OC&C Strategy Consultants in London show.

The country’s biggest opportunity may be next door in China, where K-pop idols and soap opera stars carry Korean consumer brands into a market that’s expected to have 850 million people online by next year.

“There is huge money to be spent online by the Chinese,” said Lee Eun-cheol, a retail analyst at the Korea Chamber of Commerce and Industry. “The purchasing process needs to be much simpler to attract these shoppers.”

Chao Lei, a shopper from the eastern Chinese city of Yangzhou, was in Seoul this month on a five-day trip that brought her to the capital’s Myeong-dong retail district.

“I tried to get some of this stuff online at home before I left,” she said, holding a bag filled with Korean cosmetics. “It just didn’t work, even though I clicked ‘yes’ to all of them!”

The first obstacle to many overseas buyers on Korean websites is their choice of Internet browser.

Microsoft’s Internet Explorer is favored by most of the nation’s banks and retailers, often making payments systems incompatible with Google’s Chrome, Mozilla’s Firefox and Apple’s Safari, according to the nation’s financial regulator.

The next hurdle is ActiveX security software developed by Microsoft. On top of this comes online authentication certificates and digital keys required for the majority of transactions on the web in Korea.

In an effort to bring the country closer to one-click purchases using credit cards, the government said last month it would abolish regulations requiring the use of ActiveX by the end of the year.

Angela Lee, a spokeswoman at Microsoft’s Korean unit, declined to comment on the government’s policies regarding ActiveX in Korea.

Most merchants won’t be able to change their systems so quickly, said Kim Tae-bong, chief executive officer of KTB Solution, a Seoul-based online security company.

The number of visitors from China has jumped more than sixfold in less than a decade to over 4.3 million last year, reflecting interest in Korea that could boost online purchases.

“We need to make full use of new export channels including e-commerce,” President Park Geun-hye said in an August meeting as she called on policy makers to remove hurdles to web-based exports. “My understanding is that 18 million Chinese shoppers spent $35.5 billion online last year alone.”

At home, Korean retailers are losing local customers to overseas online retailers.

Credit card purchases via websites and physical stores abroad increased 15 percent in 2013, outpacing a 3.2 percent domestic advance, Bank of Korea data shows.

Bloomberg