Chinese e-commerce firms tap Korean market, raise concerns

[Courtesy of Alibaba Group]

China’s leading e-commerce platforms Taobao and Tmall debuted in South Korea, heralding competition with Korean retailers. While this expansion promises broader avenues for Korean individual sellers and small businesses into the Chinese market, concerns are rising over the potential shift of Korea’s e-commerce dominance to Chinese companies as AliExpress and Temu have already amassed a considerable customer base.

Owned by Alibaba Group, Taobao and Tmall compete for the top two spots in the Chinese market, each boasting an annual transaction volume exceeding 900 trillion won ($658 billion).

According to sources on Monday, Alibaba Group formed Taobao Tmall Korea in January 2024, signaling the commencement of full-fledged operations.

Unlike AliExpress, which facilitates product sales to international markets including Korea, Taobao and Tmall primarily target the Chinese market, providing a platform for Korean and overseas sellers to directly sell to Chinese consumers in a reverse direct online purchase model. With a combined user base of nearly 900 million, Taobao and Tmall’s annual gross merchandise value (GMV) both top900 trillion won. The two platforms merged in 2022 to enhance synergies, and the entity operating in Korea is reported to be the Korean branch of the integrated Taobao-Tmall corporation.

Analysis from the retail industry suggests that Taobao-Tmall’s entry into the Korean market, aimed ultimately at the Chinese market, will have both positive and negative effects.

Expanding the Chinese market access for Korean individual sellers and small businesses is seen as positive. Given the retailers’ positions as the top and second-largest platforms by transaction volume in China, Korean sellers are expected to grab greater opportunities in China.

But concerns arise about deepening Korea’s dependence on Chinese e-commerce. If Taobao and Tmall, which wield considerable influence in China, start directly recruiting Korean merchants, there could be a reduction in incentives for Korean e-commerce players to list products for sale moving forward.