Alibaba pledges $1.1b investment for Korea expansion

Chinese retail giant to set up $200m distribution center by year-end, spend $100m on improving customer service

An Alibaba Group office in Beijing (Bloomberg)

Alibaba Group, the company of Chinese e-commerce giant AliExpress, renowned for its budget-friendly offerings, plans to invest more than $1 billion in Korea over the next three years, with a massive distribution center being built within the year.

According to industry sources on Thursday, Alibaba has recently submitted its business expansion plan in Korea, including an investment of $1.1 billion, to the local authorities possibly for regulatory approval.

The investment plan includes a new distribution center worth about $200 million on a 180,000-square-meter site by the end of this year. If the plan proceeds, the facility will become the largest of its kind in Korea, equivalent to 25 soccer fields.

As part of the expansion plan, Alibaba also plans to invest $100 million to promote the products of Korean sellers globally. A new distribution channel is expected to be set up in June to sell Korean products through its diverse e-commerce platforms in Southeast Asia and Spanish-speaking countries.

Customer services are also expected to be enhanced with an additional $100 million investment. Some 300 consultants will be hired to handle customer complaints and make exchanges and refunds easier.

An Alibaba official admitted that related reviews for the new distribution center are underway but declined to further elaborate on the details, including the exact budget plan and the location.

“Alibaba is committed to consistently investing in the Korean market,” the official said. “We are continuing talks with local sellers to facilitate our expansion here.”

Sources say AliExpress could shorten delivery times for Korean customers with the enhanced logistics network and expand its presence in the nation’s fast-growing e-commerce market.

Currently, CJ Logistics, the nation’s largest shipping company, is responsible for handling AliExpress products here. Last year alone, the transaction volume more than doubled from 3.46 million boxes in the first quarter to 9.04 million boxes in the third quarter.

“If the planned AliExpress logistics center evolves into a global distribution hub, Korean sellers would have more opportunities for their products to be distributed globally,” said an official from a Korean firm selling products via AliExpress’ K-venue, a separate section dedicated to Korean products only.

Depending on its strategy, the official said, the logistics center’s location could be decided.

“If the center is targeting global operations, it is likely to be located near Incheon. If it intends to meet local demand, it is more likely to be situated within or close to Seoul.”

Another industry official refused to put too much optimism on the planned center, saying “Alibaba’s top priority seems to be securing a bigger footing in the Korean market rather than introducing more Korean products via its international distribution channels.”

“The logistics center is expected to handle products shipped directly from China. The center itself has limitations in addressing the mounting complaints about their quality issues,” he added.

Alibaba’s renewed commitment to the Korean market comes as local authorities are hinting at tighter scrutiny over growing customer complaints about the product and service quality of Chinese e-commerce platforms that are expanding aggressively here in terms of transactions.

On Wednesday, Korea’s Fair Trade Commission said it would strengthen the monitoring of their unfair business practices and uphold stern punishments for any illegal activities under relevant domestic laws.

By Kim Hae-yeon(hykim@heraldcorp.com)