After taking a look at the e-commerce situation in Nigeria, this week we come back to Asia. Today we are going to give you some insights about how the e-commerce sector is going in South Korea, a country with a population of 50.62 million with a GDP of $1.378 trillion.
In terms of general economy, South Korea has shown the world how far you can go when doing the right things. Koreans achieved a 10% average growth between the ‘60s and halfway through ‘90s. Now its performance is significantly lower. In point of fact, we can expect a developed country with growth numbers of two digits. But its data is still interesting for a developed country. Following OECD report, its growth will be 2.7% in 2016 and about 3% in 2017.
Looking at e-commerce, the country is promising. Statista states that it is the 7th biggest market in the world and the World Bank estimates that it had an internet penetration of 84.33% in 2014. Meaning that we are talking about a mature market that should be able to generate big profits for competitive companies. Actually, Statistics Korea reports that online shopping transactions have increased an average of 22% in the last 15 years. If we focus on mobile shopping the data is even more impressive. From 2013 to 2015 mobile shopping transaction values have increased 93.1 percent on the annual average. The crown jewels are travelling websites followed by fashion, electronics and food.
One thing everyone researching e-commerce competition in South Korea notices is that Amazon is not there. It is surprising, but Korean shoppers wanting to buy from Amazon have to go to Amazon global and wait to see how much the shipping costs are. However, the country has its own big names. The most important player in the market is Coupang.com. But it is not alone. Some other important companies dedicated to e-commerce are Auction.co.Kr where customers make their price comparisons looking for deals, 11st that also has gone overseas and now is a very important player in Malaysian market, GMarket, another auction website, TMON, WeMakePrices, Paran.com, Fashionplus, and some others.
As usual in e-commerce deals and offers are an important and powerful marketing tool. Having an efficient pricing strategy is mandatory, because prospective buyers will surely research different businesses to get the best price. The VAT is 10 %. When exporting, you don’t need to pay it, because the government will ask your customers to pay it. But it is always a good idea to take it into consideration when deciding your prices, since the customer doesn’t care how much you get, but how much he or she has to pay. Besides, Korea has a different numerical system that is slightly different than Arabic numbers. So even if you are using Arabic numbers, we recommend asking for help from a native to avoid misunderstandings, at least in the beginning.
Regarding payments, the behavior is not very different than other countries. While older buyers may feel more comfortable with credit cards and bank transfers, young people are used to paying through e-wallets, though Koreans seem more concerned about security than the average European customer.
When it comes to shipping, Korea is a country with a comprehensive infrastructure. But, e-commerce always has its challenges for managers, and as it happens with the rest of the world, one of the areas in which competitors are struggling is same-day delivery. For now, companies are just testing it in the city of Seoul, but there is no doubt that is something to follow in the next months.
As a conclusion, the Korean e-commerce market is interesting, but making room for your business won’t be easy. For big companies, the effort will be worthwhile if they have something different to offer. For SMEs the most efficient way would be join a big platform for online shops and start from there. However, it is important that you research the shipping costs and times. As we said, Korea has good communications and Koreans are used to fast deliveries. If you are going to sell from your country, be sure to state that clearly in your terms and conditions, or you may finish with a bunch of bad ratings.