AliExpress lures Korean food companies with hefty incentives

(123rf)

AliExpress, the Chinese e-commerce platform owned by Alibaba Group, has been reaching out to Korean food companies to diversify its product range and gain recognition among Korean consumers.

Following South Korean food giant CJ CheilJedang early this month, a slew of Korean food companies are either entering or considering joining the Chinese platform.

According to industry sources on Thursday, Dongwon F&B, known for its canned tuna products, and Samyang Foods, famous for its spicy Buldak ramyeon series, have signed deals with AliExpress. Nongshim and Pulmuone are also reviewing entry into the Chinese platform.

"With the Chinese platform gaining traction nationwide recently and more people flocking to it, we couldn't help but start to see the platform as another opportunity to expand our sales channel," said an official from one of the food companies that signed a contract with AliExpress.

Lately, AliExpress has been ramping up its efforts to onboard more Korean companies to sell their products on its platform. This initiative comes in response to increasing feedback that the range of products available on AliExpress has primarily focused on everyday items from Chinese sellers, which are also made by Chinese manufacturers.

In October, AliExpress launched K-Venue, a special section exclusively showcasing products from Korean sellers, especially food companies.

“By offering locally produced daily products that people purchase regularly, AliExpress might aim to encourage customers to revisit frequently, thereby solidifying its consumer foundation,” said Lee Young-ae, a professor of consumer science at Incheon University.

One of AliExpress’s strategies to attract Korean companies is free access to its platform.

Since October, the Chinese e-commerce platform has been offering a temporary promotion to exempt Korean vendors from paying fees for selling products on the platform.

Korean e-commerce platforms usually impose an average commission fee of 15.6 percent, according to government data released in December last year. Coupang showed the highest commission rate of 22.6 percent.

"As AliExpress is increasingly reaching out to the Korean market with a package of promotions, Korean manufacturers cannot avoid their courtship either," said an official from Dongwon F&B.

Meanwhile, regarding the Chinese platform's notorious reputation for products of low quality, companies that have contracted with AliExpress say that they are exempt from such concerns because they will manage product quality themselves.

"Of course, we have carefully weighed the pros and cons of entering AliExpress, and concluded that it would be acceptable for us to join the platform because we will have control over the entire process, from manufacturing to delivering the items," said the Dongwon official.

Currently, products on K-Venue are directly delivered to consumers from Korean manufacturers within Korea, whereas items bought from Chinese sellers are shipped to consumers in Korea from China under the supervision of AliExpress.

Meanwhile, its competitive pricing, which was once the hallmark of AliExpress in the e-commerce market, appears to be slipping.

For example, a CJ CheilJedang frozen chicken product is 18,610 won ($14) for three packs on Naver, while it is listed for 32,062 won for four packs on AliExpress.

While AliExpress’ ultracheap deals were made possible because items available on the Chinese platform are mostly mass-produced by Chinese manufacturers, industry officials explained the situation will be different for Korean-manufactured products.

"As the retail price for the product release is initially fixed, the final product price will not vary significantly across outlets nationwide,” said a food company official who wished to remain unnamed.

"However, since AliExpress is offering a package of promotions to attract Korean manufacturers, if they provide a considerable option, then we can share the burden.”

By Hwang Joo-young(flylikekite@heraldcorp.com)