Korean e-commerce platforms go cross-border to stem AliExpress tide

Industry

Published: 27 Mar. 2024, 07:00 Updated: 27 Mar. 2024, 13:43

Korean e-commerce platforms go cross-border to stem AliExpress tide

Actor Don Lee, AliExpress Korea's brand ambassador [ALIEXPRESS KOREA]

[NEWS ANALYSIS]

As AliExpress establishes itself as the second-largest e-commerce platform in Korea, domestic players are pulling out all the stops to prevent their sellers from migrating to China's newest platforms.

While Korean e-commerce powerhouses like Coupang, 11Street, and Gmarket typically charge commissions ranging from 10 to 20 percent, AliExpress is luring Korean sellers with its zero-fee policy.

Top five domestic e-commerce platforms [AHN DA-YOUNG]

As a result, the most popular online shopping apps among Koreans in February were Coupang, AliExpress, 11Street and Temu. While Coupang experienced an increase of 570,000 monthly active users compared to the previous year, AliExpress saw a significant surge of 4.63 million users, indicating rapid growth.

In response to AliExpress's aggressive recruitment of K-sellers, Korean e-commerce firms are devising strategies to counteract the incursion. Companies like Coupang and newcomer Interpark Shopping+ are bolstering their cross-border shipping capabilities, while 11Street has launched its first-ever fulfillment service tailored specifically for open market sellers, among various other incentives aimed at attracting and retaining sellers.

Interpark Commerce launched Interpark Shopping, a global shopping service, on March 25. [INTERPARK COMMERCE]

Cross-border shipping
Domestic e-commerce platforms have ventured into cross-border shipping in a bid to tap into international markets. The move is seen as a dual effort to support small businesses while bolstering their own influence in global markets and stemming the flow of sellers to Chinese e-commerce platforms.

Interpark Commerce, in collaboration with parent company Qoo10, has unveiled a new global shopping platform, Interpark Shopping+. This platform allows sellers to reach consumers across Qoo10's network, spanning Japan, the United States, Singapore, India and China. Sellers listing their products on Interpark Shopping+ gain visibility on Qoo10's international platform, supported by an automated translation system for seamless communication with overseas customers. Meanwhile, domestic consumers can also access and purchase items from abroad.

"Interpark Shopping+ provides consumers with the convenience of browsing and purchasing products from Qoo10's global channels, while enabling sellers to streamline the complexities of overseas sales and seamlessly expand into international markets, mirroring the ease of domestic shipping," a company spokesperson said.

Coupang's delivery trucks [YONHAP]

Coupang has expanded its direct overseas purchasing service to include Japan in addition to existing countries such as the United States, China and Hong Kong. With Japan added to its service, Coupang customers can now purchase food brands from the country like Nissin and Meiji, as well as household and beauty brands such as Senka, Bioré and Tsubaki. Furthermore, members of the platform's paid WOW membership program can enjoy the added benefit of free shipping.

Qoo10, a Singapore-based marketplace that owns several Korean e-commerce platforms, recently acquired the North American global shopping platform Wish for 230 billion won ($171 million). This acquisition signals Qoo10's commitment to strengthening its cross-border commerce capabilities. The firm plans to leverage Wish as a primary avenue for Korean product sales alongside subsidiaries TMON, WeMakePrice and Interpark Commerce.

"For e-commerce platforms that need to attract a wide range of high-quality sellers, there is inevitably fierce competition," an official from an e-commerce operator said. "The cross-border market not only offers an opportunity for small business owners to expand their reach but also allows platforms to diversify their sales channels."

11Street's Shooting Seller service, a fulfillment service that handles the logistics processes of online sales, including storage, packaging, shipping, inventory management, returns and exchanges, launched on March 20. [11STREET]

Faster delivery
Some domestic e-commerce players are rolling out their own tailored fulfillment solutions. This comes as AliExpress unveiled plans for a fulfillment center in Korea within this year in addition to waived commission fees.

Alibaba Group, AliExpress's parent company, has publicized plans to establish its first Korean logistics center, reportedly with an investment of $200 million. Although detailed specifics have yet to be disclosed, industry insiders speculate that AliExpress might opt to lease an existing domestic warehouse to cater to local sellers. This move is anticipated to significantly reduce delivery times, currently ranging from a minimum of five days to a maximum of four weeks, to just one to two days.

11Street has launched a comprehensive logistics service, offering end-to-end solutions from product storage and packaging to delivery, exchanges and returns. Sellers can simply send their merchandise to 11Street's logistics hub in Incheon, where the company manages all aspects of the logistics process. 11Street also extends its services to encompass orders originating from other e-commerce platforms.

"Amidst a growing range of seller platforms, there is a rising demand for streamlined logistics operations," a 11Street official said. "Initiatives like these enable sellers to gain a competitive edge in terms of swift delivery and cost efficiency, while customers benefit from an expanded array of next-day delivery offerings."

Similarly, Gmarket has expanded its next-day delivery service to include fresh products.

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

Record closures for K-shopping malls
The proliferation of Chinese e-commerce giants last year resulted in a record number of domestic online shopping mall closures, particularly affecting small- and medium-sized enterprises in the consumer goods sector.

AliExpress saw a user base of 8.18 million last month, edging past 11Street's 7.36 million and ranking second only to Coupang in monthly active users among Korea's online shopping platforms, according to mobile market research firm WiseApp, Retail, Goods. Along with AliExpress, Temu also surged, reaching fourth place with 5.81 million users.

Gmarket, acquired by Shinsegae Group for 3.5 trillion won in 2021, has reported losses for two consecutive years from 2022 to 2023. SSG.com, also under the Shinsegae umbrella, received a 1 trillion-won investment in 2019 to start anew as a corporation, but has yet to turn profitable.

11Street, which secured a 500 billion-won investment in 2018, now finds itself needing to seek a new owner through the process of a sell-off following unsuccessful attempts at an initial public offering amidst escalating losses.

Many small business owners in domestic e-commerce open markets face additional challenges, as a significant number of them engage in the purchasing and selling of various consumer goods, including household items and clothing, sourced from China.

This is evidenced by data — the number of closures of online retail businesses in Korea reached a record 78,580 last year, marking a 37.3 percent increase from the previous year, according to data from the Ministry of the Inferior and Safety. By February of this year, closures had already increased by 29.3 percent compared to the same period last year, hinting at a potential surpassing of last year's figure.

AliExpress' “100 billion Festa” sale, launched on March 18 to commemorate its anniversary, includes a limited-time offer of extra-low prices and random discount coupons. [SCREEN CAPTURE]

Domestic companies have voiced concerns about discrimination favoring the Chinese platforms, citing various instances of sanctions evasion such as an absence of product safety inspections like KC certification and duty exemptions.

"Products purchased through AliExpress are not subject to customs duties if the price remains below $150, whereas domestic sellers face additional costs for customs clearance and certification," one seller noted. "We simply can't match these rock-bottom prices that have been set."

Experts stressed the need for policy changes to support domestic platforms rather than the imposition of regulations.

"The threat to domestic companies in Korea's online shopping arena has escalated as Chinese e-commerce encroaches, exploiting the market's already saturated growth," said Jung Yeon-sung, a business administration professor from Dankook University, during a recent seminar.

"Regulations could backfire on our companies," he said. "Instead of regulating domestic platforms, we should shift the policy paradigm by offering support. At the governmental level, it is imperative to introduce overseas sales agency centers to aid small businesses and ensure consumer data doesn't flow to China by hosting servers in Korea."

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