Kakao, favored bidder for eBay Korea, sits this one out

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Kakao, favored bidder for eBay Korea, sits this one out

Kakao shopping on KakaoTalk messaging app [KAKAO COMMERCE]

Kakao shopping on KakaoTalk messaging app [KAKAO COMMERCE]

 
When eBay Korea put itself on the block in January, Kakao seemed to be one of the most promising bidders as it does battle in the highly-competitive e-commerce market.  
 
Kakao was expected to utilize its banking and payment services to secure more sellers and buyers for eBay Korea’s platforms following the acquisition to stand against market-leader Naver and recently-listed Coupang.  
 
eBay Korea runs Gmarket, Auction and G9.
 
Bucking expectations, Kakao, which operates Kakao Commerce, did not take part in a preliminary bidding round for eBay Korea that took place on March 16, according to industry sources. Kakao refused to clarify, citing confidentiality.
 
Kakao Commerce, which offers gift services and in-app shopping on KakaoTalk messaging app, was seen bidding because acquiring eBay Korea could raise its online transactions to 25 trillion won ($22.32 billion) annually, surpassing Coupang’s total and putting it on par with Naver, according to Kim Hyun-yong, an analyst at Hyundai Motor Securities.  
 
Total online transactions made on Kakao last year were 4.6 trillion won, the seventh most after Naver, Coupang, eBay Korea, 11st, WeMakePrice and TMON, according to data provided by a research center at Meritz Securities.  
 
eBay Korea was the third largest e-commerce player in Korea last year. It accounted for 12 percent of domestic e-commerce market, just behind Coupang’s 13 percent, according to data by Statistics Korea and Kyobo Securities research center. Naver led the market at 17 percent.
 
The final buyer of eBay Korea is expected to pay around 5 trillion won for the acquisition.
 
The high price and lack of synergies are seen as the primary reasons for Kakao staying on the sideline.  
 
“Kakao has already established its own business ecosystem from KakaoTalk to Kakao Pay,” said Prof. Seo Yong-gu, who teaches business at Soomkyung Women’s University. “It would be a better strategy for Kakao to grow commerce through its established business structure instead of spending 5 trillion won and adapting new systems to the existing business ecosystem.”
 
“If Kakao had decided to acquire eBay Korea [to become a major player to] stand against Coupang, it would have to invest massive amount of money on building logistics infrastructure,” said Park Jong-dae, an analyst at Hana Financial Investment.
 
As an open market, eBay Korea mostly relies on logistics firms for delivery. Coupang has its own logistics facilities, while Naver partnered with CJ Logistics, the largest logistics firm in Korea, and became the largest shareholder of Mesh Korea, an operator of last-mile delivery service provider Vroong.
 
“Kakao already has a [successful] platform, which online retailers ultimately want, and therefore, is questionable whether it needs to spend significantly in acquiring eBay Korea,” Park added.  
 
Kakao's unsuccessful partnership with 11st, another open market operator, last year was also seen as a reason Kakao stepped back.
 
“Price competitiveness and optimal logistics service are the key to the e-commerce market these days, and Kakao Commerce is focusing on diversifying product categories to expand user base,” said a spokesperson for Kakao Commerce.  
 
Shinsegae and Lotte are among the retailers that took part in the bid to acquire eBay Korea, according to local media outlets.  
 
BY JIN MIN-JI [jin.minji@joongang.co.kr]
 
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