Korea calls for regulations as price gap with China widens

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

As Chinese e-commerce giants such as Alibaba Group‘s AliExpress and PDD Holdings’ Temu gain an increasingly bigger share of the South Korean market, Korean small business owners selling low-priced items ranging from fashion to daily necessities are grappling with a widening price gap and calling for regulatory action.

According to an analysis of price differences of five products between Chinese and Korean e-commerce platforms by the Maeil Business Newspaper on Thursday, goods sold on Korean platforms are about 3.5 times more expensive than those on Chinese counterparts. A remote-controlled car sells for 39,900 won ($29.02) on Korea’s Naver Store, while the same car sells for 12,750 won on Temu, about a third of the Korean price. Similarly, a double-headed floor lamp that costs 9,730 won on AliExpress costs 35,780 won on Korea‘s Gmarket.

The significant price difference is attributed to various factors such as taxes, certifications, and additional fees. When Korean sellers import goods from China, they pay a customs duty of around 8 percent and 10 percent value-added tax, as well as other expenses to certify products such as cosmetics or baby items, which cost at least 1 million won. Electronic products require electromagnetic wave certification, and items containing plastic are subject to plastic waste disposal fees. Taking all of these costs into account, the total cost per item is approximately five million won, with an additional 5,000 won per unit for a sales volume of 1,000 units.

In contrast, direct purchases from overseas platforms allow duty-free transactions of up to $150 per day, bypassing domestic certification and additional disposal fees. China’s status as a developing country in the international postal fee system also allows for low-cost shipping for items worth only a few thousand won, facilitating free shipping for products that are worth 1,000 to 2,000 won. “Those who sell products on AliExpress or Temu, regardless of their sales in Korea, do not pay taxes here,” an industry insider said.

While Korean manufacturers and distributors are additionally subject to various other regulations to ensure product quality, safety and fair trade, sellers on overseas e-commerce platforms operate outside these regulatory frameworks. Professor Suh Yong-gu of Sookmyung Women‘s University highlighted the overwhelming dominance of prices on Chinese e-commerce platforms, calling it a “tilted playing field”.

Concerns are now growing about the potential shift to Chinese platforms in the Korean e-commerce market. Coupang, the leading e-commerce platform in Korea, primarily sources goods from local Korean SMEs while many low-cost products on AliExpress and Temu come from Chinese factories. This shift could not only jeopardize Korean retailers, but also disrupt small manufacturing businesses’ entire ecosystem. “Ceding dominance in online retail could have a long-term impact on the manufacturing, logistics and service industries,” Dankook University professor Jung Yeon-sung said.

Small business owners are urging the government to quickly address the issue before Chinese apps completely overrun the Korean market, while seeking a temporary relaxation of excessive regulations on Korean companies or equivalent regulations on transactions from Chinese e-commerce platforms to level the playing field.