Asian e-commerce giants compete for bigger piece of pie in Korea

E-commerce players in China and Singapore are competing to gain a bigger slice of sales in Korea by offering free shipping and extremely low prices on select items.

Actor Don Lee, AliExpress' Korea brand ambassador [SCREEN CAPTURE]

E-commerce players in China and Singapore are competing to gain a bigger slice of sales in Korea by offering free shipping and extremely low prices on select items.

A cat water bowl for 14 won (1 cent), a motion-sensing LED light for 95 won, and a laptop stand for 8 won: these are some products being sold on AliExpress, the cross-border e-commerce platform operated by China's Alibaba Group.

The items come with free shipping and can be received within a few days, though some are subject to limited-time offers or first-purchase discounts.

AliExpress has been strengthening its marketing strategy in Korea since its entry to the market in 2018.

In early March, AliExpress announced a 100 billion won investment plan in the country.

It built a Korea-specific logistics warehouse in China's Shandong Province, enabling delivery to the greater Seoul area in as little as three days thanks to its close location to the Korean Peninsula.

Last November, the Chinese shopping platform opened its first customer center in the Seoul metropolitan area. Recently, it began an exclusive TV advertising campaign with actor Don Lee as its endorsement model, in a move to counter the Chinese platforms' negative image by leveraging the familiarity of the action film star.

Qoo10, a Singapore-based site quickly growing in Southeast Asia, has been expanding its cross-border e-commerce business in Korea since establishing its Korean subsidiary last year.

After acquiring TMON, a first-generation Korean e-commerce platform, last year, Qoo10 has continued to increase its market presence by also acquiring Interpark Commerce and WeMakePrice.

TMON has already shortened cross-border delivery times by at least three days since its merger with Qoo10 by using the Singaporean platform's logistics subsidiary, Qxpress.

According to TMON, its cross-border sales surged 55.9 percent last month compared to the same period six months ago, before it was acquired by Qoo10.

"We have greatly reduced logistics costs by using the 19 warehouses in 11 countries that Qxpress owns," a TMON official said. "As delivery conditions have improved, the price competitiveness unique to cross-border shopping has become more apparent to consumers."

E-commerce giant and the world's largest retailer, Amazon, made its way into the Korean market through a partnership with the local online marketplace, 11st, in 2021.

The cross-border shopping market in Korea has seen steady growth since around 2014, with the popularity of various sale events like Black Friday in the United States, Singles' Day in China and Boxing Day in Britain. However, the market has faced challenges due to long and costly shipping, difficulties with returns and the inconvenience of their apps.

In recent times, this trend has begun to shift as companies engaging in cross-border sales have ramped up their efforts to target the Korean market by including initiatives such as setting up Korean-language call centers and offering items at ultra-low prices.

A report by mobile data analysis company Mobile Index showed that AliExpress claimed the top spot in the domestic shopping app category in terms of downloads in March, overtaking Danggeun Market, which had held the No. 1 position for the previous 35 months.

Last year's cross-border shopping reached 96.12 million transactions at a value of $4.725 billion — an increase of 198 percent for transactions and 71.5 percent for value, compared to 2018, according to the Korea Customs Service.

The rapidly expanding domestic e-commerce industry is the driving force behind the interest in global e-commerce companies in the Korean market.

Over the years, the Korean e-commerce market has grown significantly, from 38 trillion won in 2013 to around 200 trillion won in 2022. Even though the growth rate has slowed recently, some predict that cross-border shopping will emerge as a new source of growth for the industry.

"Alibaba is targeting Northeast Asia through AliExpress to find new growth momentum as the Chinese e-commerce market slows down,” said Lee Dong-il, a business administration professor at Sejong University.

"However, we need to keep an eye on whether they will be able to secure as much market share as they want, given the intense competition in the Korean e-commerce market.”

BY YOO JI-YOEN [seo.jieun1@joongang.co.kr]