Alibaba Group to invest $1.1 billion in Korea over next three years

Industry

Published: 14 Mar. 2024, 12:53 Updated: 14 Mar. 2024, 19:21

Alibaba Group to invest $1.1 billion in Korea over next three years

Ray Zhang, general manager of AliExpress Korea, announces a 10 billion won ($7.6 million) investment plan against counterfeiting products during a press conference held in central Seoul on Dec. 6. [ALIEXPRESS KOREA]

China's Alibaba is investing $1.1 billion in Korea over the next three years as it eyes expansion in a country it considers "one of the top five markets."

Alibaba is the parent company of the online shopping platform AliExpress, which advanced into Korea in 2018, and is fast growing to threaten domestic rivals like Coupang and 11Street.

The Chinese group recently reportedly submitted a comprehensive business plan to Korean authorities in a move to strengthen its foothold in the region.

New logistics center equivalent to 25 football pitches
While Alibaba did not disclose specific details of its business proposal, local media reports on Thursday indicate that Alibaba intends to construct its first logistics center in Korea by the end of the year with an investment of $200 million.

Spanning 180,000 square meters, the center is equivalent to 25 football pitches. While smaller than Coupang's Daegu Fulfillment Center, the largest in Korea at 330,000 square meters, it's comparable in size to Market Kurly's Pyeongtaek logistics center at around 200,000 square meters. The new logistics hub aims to enhance nationwide delivery for AliExpress products.

Alibaba additionally earmarked $100 million to support Korean sellers in accessing global markets, facilitated by the establishment of a dedicated sourcing center for Korean products. A global sales channel is slated to be launched in June, facilitating the export of Korean goods abroad.

The banner on AliExpress Korea displays announcements regarding upgraded customer services, including the launch of a customer center hotline. [ALIEXPRESS KOREA]

Full refund for delivery delays, fake items
The investment plan is also said to include an array of consumer-protection policies, including those against counterfeit products.

AliExpress separately announced on Thursday the launch of a customer service hotline operational from 9 a.m. to 6 p.m. on weekdays. For items purchased from overseas, AliExpress has committed to offering a full refund within 90 days of payment without the need for additional proof. Moreover, customers will receive a full refund for products not delivered within the promised timeframe, along with a coupon worth 1,300 won ($1) per order issued for a delayed delivery. Reports indicate that AliExpress has allocated 100 billion won for such consumer rights measures.

Addressing the chronic issue of counterfeit items prevalent on Chinese platforms like AliExpress, the company unveiled plans to invest 10 billion won over the next three years to detect and prevent the sale of counterfeit goods and safeguard consumer intellectual property rights last December. The platform also pledged to provide a full refund for any items found to be counterfeit or suspected of forgery.

These initiatives come one day after the announcement of regulations by the Fair Trade Commission aimed at strengthening monitoring of overseas online platforms and ensuring the uniform enforcement of domestic laws without discriminating against domestic e-commerce platforms. The government is also considering amending the E-Commerce Act to mandate that overseas companies over a certain size to designate a local representative based in Korea and establish communication channels dedicated to customer complaint, even if they lack a physical presence in the country.

"Just the beginning" of Chinese platform's foray into Korea
Domestic e-commerce stakeholders voiced concerns over Alibaba's assertive strategies, citing its substantial financial strength.

"It's challenging to gauge the full impact without precise investment details, such as the purpose and location of the proposed logistics center," stated an official from a domestic online retail platform who requested anonymity.

The official took note of Alibaba's investment plan as a formal declaration of its expansion in the Korean market, given its unmatched market capitalization. The market capitalization of Alibaba stands at around 190 billion won, roughly six times that of Coupang at around 34 billion won.

"This could just be the beginning," the official added.

AliExpress attracted 8.18 million monthly active users to its platform last month with ultra-low pricing and aggressive marketing, becoming the second-largest shopping platform by users in Korea after Coupang with 30.1 million monthly active shoppers, according to Wiseapp, Retail, and Goods. Recently, AliExpress opened a dedicated channel for Korean sellers, called K-venue, attracting major Korean companies such as Amorepacific, LG Household & Health Care and CJ CheilJedang with its zero-commission fee.

"Although we cannot disclose specific details regarding the investment plan, we will continuously expand our investment in Korea, and long-term support collaboration with local sellers, consumer protection measures, and the global market expansion of Korean SMEs," an Alibaba official said.

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