Background

60% of total retail transactions in Korea were performed online, representing around $230bUSD in retail sales. With South Korea quickly rising to become one of the top 3 ecommerce markets in the world, it’s critical that any South Korea market strategy involve an online strategy.

But what’s interesting about Korea is its unique platforms – unlike the West, Amazon is not big. Instead, it’s Coupang. iMessage, WhatsApp or WeChat are not big. Instead it’s Kakao. Google? Maybe a bit, but not like Naver. This is a unique aspect of the online Korean market – there is a lot of pride in creating innovation made by and for Koreans.

And from what we’ve experienced working with many foreign brands, entering and succeeding in Korea can be a bit of a black box. On the chance that you find an expert across these platforms, it’s difficult to find someone who can fully understand and interact with the key decision makers looking to enter the Korean market. On top of that, there often is not an in-market team that brands can fully trust to represent their brands in the market. Below is a quick summary and review of the top online channels in Korea.

3 Types of eCommerce Categories in South Korea

eCommerce is a broad topic, so we’ll categorize the different platforms into 3 categories: Pure Players, Social, Brick and Click and Others.

1. Pure Players: Representing 80% of the Korean eCommerce market, it’s nearly impossible to remain relevant without one of these platforms. Leading Pure Players include Coupang, Naver, G-Market and 11th Street. Most notably, Coupang and Naver are often neck and neck in terms of market share of Pure Players. Coupang acts more like an Amazon while Naver acts more like Google Shopping.
2. Social and Brick & Click: Representing about 10% of the Korean eCommerce market, We Make Price, TMON, SSG.com, Homeplus and HMall are leading examples. A lot of these platforms tend have an auction-model or are extensions of larger brick and mortar companies in Korea. For example, SSG.com in an extension of Shinsegae Department Store, which is one of the leading brick and mortar “malls” in Korea. Unlike the west, Department Stores are still a popular store format usually filled with ultra-premium brands including Louis Vuitton, Prada, Rolex and the like. Homeplus is like the Walmart of Korea and operates an online extension of their business, similar to what you would see with Walmart and walmart.com.
3. Others: Representing the balance at 10%, commerce within messaging apps are quite popular as well. Similar to WeChat or WhatsApp, Kakao Talk is the app in Korea with virtually the entire Korean population using this service. Because Kakao Talk has such a captive audience, ordering a Taxi, buying and sending gifts or sending money are all possible within the app – it’s like the Swiss army knife of communication in Korea. One of the leading consumer health brands in Korea, Orthomol, has virtually built its entire business model off of using Kakao as the primary marketplace to sell its product.

There is nuance for each of these platforms. Because South Korea has such strict regulations when it comes to any imported products, especially health supplements and foods, certain online platforms are more friendly when it comes to cross-border eCommerce while others are not – which, by the way, has proven to be a game-changer for some western brands to enter Korea without going through all of the regulatory hurdles or reformulation of products. Coupang and Naver are two leading platforms that do cross-border eCommerce the best (let’s also not forget about iHerb but that’s a different topic). Other eComm platforms tend to require some form of importation to leverage their platforms, like Kakao or any of the brick and click platforms.

Launching Online is Must-Win for Brands Entering Korea

And it’s no wonder why eCommerce accounts for over 60% of total retail sales and is on the constant rise. With Korea’s advanced tech infrastructure coupled with the relatively low overheads to operate online companies, the cost to launch brands online into Korea makes a lot of business sense.

To give you an idea, it costs about 40% of a product’s retail price to launch into brick and mortar in Korea. Online, it would cost about 25% of the product’s retail price. Of course, launching offline has its strategic benefits to get the brand front and center in front of the Korean population, but should be used judiciously in the context of a broader omnichannel approach.

Conclusion

South Korea will be one of the top 3 eCommerce markets in the world in the next several years and will certainly be at the forefront of new technologies and paving the way of online commerce for years to come. Any brand thinking of entering into Korea should think online first, but within the context of a broader omnichannel strategy. But keep in mind that once a brand decides to launch online, this is the beginning of the journey. Pricing discipline and seller control all can quickly become out of hand if not monitored carefully.

Learn more how ClearIX can help by reaching out to us sales@goclearix.com or read our latest white paper on pricing and seller control when launching