Trade imbalance widens as Koreans turn to Chinese e-commerce

Industry

Published: 25 Sep. 2023, 17:40 Updated: 25 Sep. 2023, 18:52

Trade imbalance widens as Koreans turn to Chinese e-commerce

Actor Don Lee, AliExpress' Korea brand ambassador [SCREEN CAPTURE]

More Koreans are directly purchasing from Chinese online platforms, with the tally surpassing one trillion won ($747.94 million) for the first time in the first six months, according to Statistics Korea.

Koreans collectively spent 1.40 trillion won in the first half of this year from China through online platforms and other channels, data from Statistics Korea showed. The amount rose by 106 percent from the 680.8 billion won spent in the same period last year, while nearly matching the amount for the entire previous year, which was at 1.49 trillion won. Projections suggest that the import value of direct purchases from China for the current year alone could surpass the 2 trillion won mark.

In March, AliExpress, the global e-commerce platform under the Chinese online shopping giant Alibaba, revealed that Korean consumers in the spring season of 2023 were most keen on women's clothing from the Taobao Collection, art toys, camping equipment, gaming accessories, compact home appliances like coffee machines and vacuum cleaners, as well as self-service automotive accessories for their cross-border shopping needs.

On the flip side, Chinese consumers have maintained a relatively static spending pattern on Korean online shopping platforms, with a total of 451 billion won recorded for the first half of this year. The figure accounts for just 32 percent of the overall direct purchase amount from China to Korea. Furthermore, it reflects a 40 percent drop when compared to the same period last year, marking the lowest point in eight years.

China has emerged as a dominant player in the global direct purchase landscape. Global direct purchase spending has jumped from $2.75 billion in 2018 to $4.73 billion in 2022, with China claiming a 36 percent share, according to data from the Customs Office.

Korea has faced its own set of challenges when it comes to exports to China, influenced by factors such as a slowdown in economic growth, ongoing trade tensions between the United States and China, and regulatory uncertainties affecting Korean businesses. Major domestic retailers like Lotte Shopping and Emart, as well as beauty companies like Amorepacific and LG Household & Health Care, had to withdraw or downsize their operations in the Chinese market. Such a landscape, coupled with the contraction of Chinese purchases from Korea, has exacerbated trade imbalances.

Conversely, China is making aggressive inroads into the Korean direct purchase market, spearheaded by AliExpress. Since its domestic launch in 2018, AliExpress has vigorously pursued Korean consumers through an aggressive marketing strategy that included enlisting Korean action film star Don Lee as its brand ambassador and offering enticing features like free five-day shipping. In March, AliExpress unveiled an ambitious 100 billion won investment plan for Korea.

This strategy has paid off, with AliExpress ranking as the fifth fastest-growing app in the first half of this year, according to data by industry tracker WiseApp. Its monthly active user base reached 5.52 million in August, and it has climbed to the fourth spot in the rankings of shopping apps, trailing Gmarket by a mere 530,000 users.

In addition, China's e-commerce giant Pinduoduo has recently entered the Korean market.

Rumors about Alibaba Group considering the acquisition of 11st, the fourth-largest player in the online shopping market, raised concerns within the domestic retail industry regarding China's growing influence within the retail sector. Such a move could potentially elevate Alibaba to a dominant position in the Korean online retail scene, far surpassing its current role as a Chinese direct purchase platform.

11st has a transaction volume of 10.5 trillion won and the second-highest monthly user count.

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]