[NEWS IN FOCUS] AliExpress clinches Korean market

Industry

Published: 09 Feb. 2024, 07:00 Updated: 09 Feb. 2024, 08:22

[NEWS IN FOCUS] AliExpress clinches Korean market

AliExpress Korea appointed actor Don Lee as its first brand ambassador. [ALIEXPRESS KOREA]

China has clinched the top spot in Korea's overseas direct purchasing market, toppling the United States for the first time since 2014. This surge is owed to the relentless expansion of Chinese online shopping juggernauts like AliExpress and Temu.

AliExpress, in particular, made inroads into the domestic market in 2018 with its budget-friendly products and free five-day shipping. It recently created a dedicated section for Korean items with zero sales fee, successfully attracting major Korean household goods producers such as LG Household & Health Care and Aekyung Industrial.

As Chinese e-commerce firms intensify their efforts, domestic counterparts like Naver Shopping, Gmarket, 11Street, and Coupang are on high alert. There are concerns that a slowdown among local sellers could impact the sales and transaction volumes of their open market platforms, which constitute a substantial portion of their overall revenue.

AliExpress Korea's announcement seeking Korean sellers for its K-Venue section [ALIEXPRESS KOREA]

Ultralow cost, free shipping, free returns
AliExpress announced Wednesday that it is openly recruiting Korean sellers for its segment dubbed “K-Venue.” The move underscores the platform's efforts to attract not only established brands, but also smaller businesses.

K-Venue, launched last October, is a tab dedicated to selling Korean products. It offers free shipping and returns, ensuring delivery across the nation in just under three days.

The shopping tab had attracted more than 20 companies as of the end of January, featuring prominent names like LG Household & Health Care along with food and beverage giants like Lotte Chilsung Beverage and Samdasoo.

The spike in entries is fueled by AliExpress' enticing incentives for Korean sellers, including exemptions from listings and sales commissions — which usually are about 10 percent of sales on other platforms like Coupang and Gmarket — through the end of March.

“For platforms like ours, offering a diverse range of brands to customers is crucial,” said a Gmarket official. “We're especially mindful of AliExpress' strategies [like not levying sales commissions], which could lure away Korean sellers.”

AliExpress also encourages sellers to participate in its major sales events, such as the 'Double-11' in November and the 'Anniversary Sale' in March, offering opportunities for revenue expansion.

Products sold on AliExpress [SCREEN CAPTURE]

China overtakes U.S. in global shopping spree
Amid economic downturn, Chinese shopping apps armed with ultralow prices have tapped into Korea's subdued consumer sentiment, establishing a robust growth foundation.

Park Jin-ah, a 27-year-old teacher residing in Seoul, is a frequent shopper on AliExpress, often purchasing phone accessories.

“I often buy items like iPhone cases, plastic bags and organizers from AliExpress because they are much cheaper than in Korea, and the quality is not bad," said Park. "Even if I receive unsatisfactory products, I don't feel like I've wasted money, because the prices are so low."

According to data from Statistics Korea, online overseas direct purchases increased by 26.9 percent last year, totaling 6.8 trillion won ($5.1 billion). Of them, Chinese overseas direct purchases surged by 121.2 percent, reaching 3.9 trillion won, topping the spot for the first time.

AliExpress emerged as the app with the highest surge in domestic users last year, per a report from market trackers Wise App, Retail and Goods, with an average monthly growth of 3.71 million users from January through November of last year. Temu, another Chinese e-commerce platform, secured the second spot.

AliExpress currently holds the third position among shopping apps in Korea, with more than 7.17 million monthly active users, trailing behind Coupang and 11Street.

Chinese e-commerce platforms have expanded their user base through aggressive marketing strategies, with AliExpress announcing a 100 billion won investment in the Korean market and exploring possibility of establishing a logistics hub in Korea this year in partnership with CJ Logistics, the nation's largest logistics firm.

“From a market standpoint, the Korean e-commerce landscape is fiercely competitive, with no single dominant player,” Han Song-yi, senior manager at AliExpress Korea, said at a press conference on Dec. 6.

Korea has indefinitely postponed the introduction of the Platform Competition Promotion Act, a bill aimed at regulating digital platform giants like Google, Apple, Naver, Kakao, and Coupang, after facing strong backlash from industry players. The bill categorizes them as 'market-dominant operators' preemptively to prevent unfair practices such as tie-in sales and exclusive agreements.[JOONGANG PHOTO]

Tilted playing field
Local e-commerce players in Korea view the rapid expansion of Chinese e-commerce platforms, now extending their reach to Korean sellers, as a “formidable threat.”

“The aggressive penetration strategies of Chinese counterparts, backed by the financial muscle, ... not only undermine domestic competitors but also deliver a substantial blow to small businesses, particularly due to their unbeatable pricing strategies,” said an official from a Korean e-commerce platform, who requested for anonymity.

There are also concerns about bias in the government's push for the Platform Competition Promotion Act, which could disproportionately target domestic businesses.

The crux of the law revolves around identifying dominant players based on metrics like revenue, market share and user numbers, with the intention of preemptively regulating them. However, it is proving challenging for the Fair Trade Commission (FTC) to accurately assess the revenue generated by overseas businesses operating within Korea's borders.

“While the FTC maintains that the platform law applies universally, both to domestic and foreign enterprises, data of foreign platforms is undisclosed in Korea, posing obstacles for effective regulation enforcement,” the Korean platform operator official said.

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