The international trade prospects in North America are uncertain, and cross-border e-commerce is turning its attention to South Korea
The international trade prospects in North America are uncertain, and cross-border e-commerce is turning its attention to South Korea
Online shopping is not generally cheaper than offline shopping. Every time I hear people say that South Korea's logistics are strong, I still think it depends on who I compare with. It's definitely not worth talking about compared to China. "This is the evaluation of the local online shopping experience by a young person who has lived in South Korea for a long time.
In the South Korean Internet, people began to use Temu as a tool. The Chosun Ilbo reported that the local e-commerce giant was facing a profit crisis due to the impact of AliExpress and Temu. Switching to a personal perspective, many Korean users have shared their real experiences about cross-border e-commerce on their personal blogs or social media platforms.
The intersection between consumer life and cultural life is constantly emerging, and although users are active, the industry still has a viable mindset or unmet needs, which gives the Korean market a unique position in the global cross-border landscape. Since the beginning of this year, increasing investment in South Korea seems to have become a cross-border consensus. On the one hand, the growth potential of the South Korean market cannot be ignored, and on the other hand, it has been affected by frequent uncertain events in the North American market.
According to the latest data from Wiseapp Retail, a South Korean market research firm, the total payment amount of South Korean consumers on Chinese cross-border platforms (AliExpress and Temu) is expected to reach 428 trillion Korean won (approximately 3.2 billion US dollars) in 2024, a 300% increase from 2022 and an 85% increase from 2023.
Although it is the result of the joint efforts of both parties, AliExpress, which has been deeply involved in the Korean market for many years, accounts for the vast majority of transaction shares.
On February 18th, according to Yonhap News Agency, Temu announced the launch of the L2L (local to local) model in the Korean market, launching a recruitment campaign targeting local sellers in Korea. On the 19th of the same month, media reported that AliExpress's Korean warehouse located in Weihai, Shandong will expand by an additional 60000 square meters to accommodate the continuously growing order volume.
Due to the unique nature of the Korean market, it has always been regarded as an extremely important cross-border strategic pivot. At this moment, the "racing competition" of cross-border e-commerce in South Korea has to some extent replicated the pursuit of their respective parent companies in China.
01. Foreign Alibaba and local JD.com
South Korea holds a strategic position as a "high-level market training ground" due to its large market size and high market maturity. The Internet penetration rate in South Korea is as high as 94%, e-commerce is deeply integrated into production and life, and online shopping is particularly popular among young people. According to Statista data, the e-commerce penetration rate in the South Korean market is expected to reach 64.1% by 2024 and is projected to increase to 76.7% by 2029.
In short, it means that the young group with good online payment habits, strong e-commerce consumption power, and the most easily influenced by marketing are still active.
In this context, cross-border operations require little mental construction, and consumers are sensitive to cost-effectiveness and willing to pay for quality premiums. Many brands have already set their sights on this blue ocean, such as Stone Technology's sweeping robot, which had a market share of over 40% in South Korea last year, and BYD's compact pure electric SUV ATTO 3, which received over 1000 orders within just one week of its launch in South Korea.
As a cross-border B2C platform, AliExpress officially entered the Korean market as early as 2018. In the first three years, it was still in the construction period of logistics and traffic ecology, including shortening logistics time, building localized traffic entrances, and integrating top payment tools in Korea such as Kakao Pay and Naver Pay.
Starting from 2022, water testing has turned into deep cultivation. Firstly, a more thorough localization strategy was implemented. In November of that year, AliExpress established a Korean language customer service center in Seoul to provide corresponding after-sales services. Synchronized promotion is a series of marketing strategies, such as shopping subsidies, offline advertising, and cooperation with more local platforms. In terms of the choice of spokespersons, the partners of AliExpress are Ma Dongxi, who has national level popularity, and Tang Wei, the "most popular Chinese actor" in Korean cognition.
Creating price advantage is a standard feature for cross-border entry. According to the Korea Times, an instant coffee is priced at $30.51 (41000 Korean won) on AliExpress, but the same product is priced at 47200 Korean won on Coupang.
However, the most crucial breakthrough in this series of business plans is still logistics.
The widely recognized largest e-commerce platform should be Coupang, but it is not entirely similar to Taobao in China. For example, clothing categories are mostly ordered on brand websites We have learned from people living in South Korea that Coupang, as a local national e-commerce giant, has the strongest consumer mentality in terms of logistics fulfillment.
As of 2020, the total population of South Korea exceeded 50 million, with 50.2% living in the capital region including Seoul, Incheon Metropolitan City, and Gyeonggi Province, making it a typical high-density country. This is particularly beneficial for the construction of logistics networks. In addition, due to the small land area and fast pace of life, consumers have high demands for timeliness.
We are not unfamiliar with Coupang's path to establishing competitive advantages, which is "self built warehousing logistics". With high-density layout, its "Rocket Delivery" service can achieve same day or next day delivery, and even some regions support "Dawn Delivery" (delivery before 7am the next day after placing an order). If we shift our focus to the domestic market, this is similar to JD's positioning.
In 2022, AliExpress will build preferred warehouses in Weihai and Yantai, Shandong, allowing some areas in South Korea to achieve 3-5 day delivery; By 2023, the expansion of dual warehouses will exceed 30000 square meters; As mentioned earlier, Weihai warehouse may expand by another 60000 meters.
Competitive advantage cannot be applied for patents after all. When Temu, an old rival from China, also joins this gold rush, the demand for speed in expanding territory has almost entered a new level.
02. Opportunities for live streaming e-commerce and scrutiny of business compliance
Temu will not officially enter the Korean market until 2023, but its growth rate is astonishing. In the initial stage of entry, it was still a strategy of small profits and high sales for Yizhaoxian, including launching discounts of up to 90%, points rewards of hundreds of thousands of Korean won, large discount coupons, and free first returns. At that time, the product delivery time was about one or two weeks.
The marketing assault has indeed been effective. When Temu entered South Korea in August 2023, its monthly active users were 510000, and by March of the following year, it had risen to 8.29 million. Previously, AliExpress had already explored the road, and Temu's localization promotion seemed to have doubled its speed. In terms of team building, a branch was established last year and local employees covering various positions were recruited; In terms of logistics system, we cooperate with local logistics companies in South Korea while establishing warehouses. As mentioned earlier, the recent official recruitment announcement specifically states that the entry requirement is for the Korean main company.
Such a radical expansion strategy corresponds to a rapidly evolving market. In addition to strong consumer demand, live streaming e-commerce is becoming increasingly popular in South Korea. According to Grand View Research, the compound annual growth rate of the Korean live streaming e-commerce market is expected to reach 36% from 2025 to 2030, and the revenue of the Korean live streaming e-commerce market will exceed $4 billion by 2030.
In addition to local platforms launching live streaming models and joining the trend of live streaming sales, YouTube, which has a large user base in South Korea, launched the "YouTube Shopping Store" in June last year. Viewers can directly purchase products through banners displayed during live streaming. In addition, YouTube also collaborates with large retailers such as CJ OnStyle and 11st to provide sales channels.
Fashion may be a category that opens up opportunities, not only because fashion is a very suitable category for live streaming displays and promotions. Firstly, Korean consumers have a high level of recognition for brand official websites. Statista's market research also shows that the main reason for not choosing live shopping is that they prefer to purchase goods from official websites or physical stores, or are not interested in the products/services provided.
At the same time, fashion is a "strong category" in China's cross-border e-commerce, relying on domestic supply chain advantages and category operation experience to provide more competitive prices and faster style updates.
But in addition to positive incentives, the scrutiny of business compliance also follows closely.
In March last year, the South Korean government announced that it would amend relevant laws to mandate large foreign online platform operators to establish local companies or offices in South Korea, and regulatory agencies would strengthen monitoring of foreign online retailers' improper business practices.
The rapidly rising Chinese e-commerce companies in South Korea have occupied the market with zero commissions, high subsidies, and rich marketing strategies, and have raised regulatory concerns. It is not difficult to predict that this kind of plot will continue to play out in more cross-border markets, as the world is experiencing similar ups and downs.
At the end of last year, media reported that Alibaba and the e-commerce platform under South Korean retail giant E-Mart Inc. had reached a cooperation intention, and the two sides would jointly establish a joint venture valued at about 4 billion US dollars. Establishing deeper cooperative relationships with local enterprises may be a trend in future cross-border operations. While further countering local competitors, avoid potential market risks.
03. Summary
If Southeast Asia is the "backyard" of going global, North America and Europe are rich but crowded, Latin America has high barriers to entry due to geographical and cultural distance, South Korea has a huge market size, and under the influence of the proximity effect in the East Asian circle, it naturally becomes an important base for cross-border operations.
JD Logistics announced earlier this year that since January, the number of express delivery orders from China, especially Shanghai, to South Korea has been increasing, and the order volume has increased by 30% month on month. Recently, JD's business in Korea has also seen new trends. Orders placed through the app can be shipped directly to Korea, and consumers can enjoy free shipping of 3KG by sea for orders over 199 yuan. The product category covers a large number of JD's self operated products.
In response to Amazon's efforts to attract Chinese sellers to compete with cross-border platforms, local Korean giants have also been inviting Chinese sellers to join in recent years to enrich the supply of low-priced products, such as Coupang mentioned earlier.
Finally, Kapoklog Logistics gave its own suggestions to all international trade practitioners, especially cross-border e-commerce practitioners from China to South Korea, where the e-commerce market is growing fast, but don't forget the fierce competition and high logistics costs. To establish a firm foothold, it is necessary to have a deep understanding of the local market and carry out differentiated operations.
