Alibaba Group to invest $1.1 billion in Korean retail market

[Graphics by Song Ji-yoon and Chang Iou-chung]

China’s Alibaba Group, the parent company and operator of global online marketplace AliExpress, is poised to take a significant step into the South Korean market with an investment of about 1.5 trillion won ($1.1 billion).

Sources within the industry revealed on Thursday that Alibaba Group recently presented a business plan to the Korean government, outlining a proposed investment of $11 billion over the next three years. With a total market capitalization of 500 trillion won and listings on both the Hong Kong and New York stock exchanges, Alibaba Group operates several prominent online commerce platforms globally, including Taobao, Tmall, AliExpress, Lazada, and Trendyol.

The submitted business plan indicates Alibaba Group’s intent to diversify its activities in the Korean market beyond AliExpress and the company will allocate $200 million towards the construction of an integrated logistics center in Korea within 2024 as part of this strategy. This facility, spanning an area of 180,000 square meters, signals Alibaba Group‘s direct targeting of the Korean market.

Until now, Alibaba Group’s business in Korea has mainly focused on facilitating direct sales and shipping from Chinese market sellers to Korean consumers. However, with the establishment of this logistics center, Alibaba Group aims not only to continue its existing direct purchasing services via air and sea transportation, but also to directly procure goods within Korea. This strategic shift puts Alibaba Group in direct competition with Korean e-commerce platforms, including Coupang Inc., especially if it implements a next-day delivery system similar to Coupang‘s Rocket Delivery.

“There could be a potential increase in the Korean customer base for the Alibaba Group once fast delivery services begin in Korea,” Park Seung-chan, a professor of Chinese Studies at Yongin University said.

Ray Zhang, CEO of AliExpress Korea, explains the business plan at a press conference held in December last year. [Photo by Aliexpress]

In addition to infrastructure investments, Alibaba Group plans to invest $100 million to support Korean sellers in accessing global markets. This initiative includes establishing a sourcing center to identify high-quality Korean products and creating sales channels for exports, not only via AliExpress but also through other Alibaba Group-owned platforms such as Lazada and Miravia.

The latest move by Alibaba Group is perceived as a response to the recent anti-Chinese sentiment prevailing in the Korean e-commerce landscape. As part of its strategy, the company will invest 100 billion won in Korean consumer protection measures and establish a customer service center staffed with 300 professionals to facilitate refunds for purchases made directly from China within 90 days, without any conditions.

“We cannot disclose specific plans yet, but we will continue to expand investment in Korea,” the company said, emphasizing its intention to offer “long-term support” for local Korean SMEs entering global markets as well as fostering collaboration with Korean sellers and ensuring consumer protection.

Alibaba Group is also aggressively recruiting retail personnel from Korean competitors, particularly in the fashion sector. This strategic hiring spree is aimed at increasing the company’s market share by featuring Korean brands prominently on its platform, posing a potential threat to local fashion platforms.

The recruitment efforts will also extend beyond fashion to include beauty and household goods sectors. Alibaba Group emphasizes sourcing expertise in the Korean market as a key qualification for applicants, suggesting a concerted effort to bolster the presence of Korean brands on its platform. While known for offering low-priced Chinese products, Alibaba Group has diversified its product range to include offerings across various price points from Korean brands.