Failure! Tens of thousands of sellers have failed in this 800 billion market this year

According to foreign media reports, Alibaba and South Korea's Shinsegae Group announced that they will cooperate to establish an e-commerce joint venture to jointly promote the development of online business in South Korea and the global market.

This move by Alibaba once again made the editor pay attention to this market not far from China.

The market size is close to 820 billion, but nearly 160,000 online stores have closed in two years

According to GlobalData, the size of South Korea's e-commerce market will grow by 10.2% in 2024 to 164.3 trillion won, or about 815.585 billion yuan , and this growth trend will continue until 2028.

Statistics from the Ministry of Trade, Industry and Energy of South Korea show that in November this year, the total sales of 23 major offline and online retailers in South Korea reached 16 trillion won. Among them, online sales performed well, increasing by 11.8% year-on-year, accounting for 53% of total retail sales.

In addition, a consumer survey in South Korea showed that the frequency of online shopping in South Korea is also very high. 79% of people have purchased goods through online channels in the month before the interview, and only 6% of the respondents have never shopped through online channels.

From this perspective, South Korea's e-commerce environment is quite good.

However, unlike the vibrant e-commerce market as a whole, the number of online stores that have closed down in South Korea has been on the rise in the past two years.

In 2023, the number of online stores closed in South Korea was 78,580 , an increase of 37% compared with 2022; in the first 11 months of this year, the number of online stores applied for closure in South Korea has exceeded this figure, reaching 796.96 million - in January this year alone, the number of online stores closed was 17,355, an increase of 40% over the same period last year.

According to the Ministry of the Interior and Safety of South Korea, according to this trend, more than 80,000 online stores will close down in South Korea this year . Most of these stores are concentrated in furniture, electronics, food, clothing, and of course, other categories.

The Korean industry believes that the main reason for the surge in the number of online store closures in South Korea is the rapid expansion and fierce price competition of Chinese e-commerce platforms such as Temu, AliExpress, and SHEIN . Data shows that in the first half of this year, the transaction volume from China in the Korean overseas shopping market increased by 64.8% year-on-year to 1.2373 trillion won (about 6.45 billion yuan), accounting for 61.4% of the total Korean overseas shopping market. Therefore, the Korean e-commerce industry believes that Chinese e-commerce platforms are rapidly grabbing market share since entering the local market.

Secondly, in the first half of this year, the delayed payment crisis caused by Korean local e-commerce platforms TMON and WeMakePrice also caused many stores to fall into capital turnover difficulties due to failure to receive payment in time, further worsening the survival environment of Korean online stores . According to statistics from the Korean Ministry of the Interior and Security , since the beginning of July this year, the crisis caused by these two platforms has led to the closure of 6,164 stores, an increase of 30.5% over the same period last year.

In addition, the continued weakness of South Korea's domestic economy, coupled with the impact of other factors, has further hit consumer confidence, causing the operating pressure of many small business owners to double.

Yonhap News Agency Perspective: The role of Chinese e-commerce in the Korean market

Just when the editor also thought that the impact of China's e-commerce platforms was the main reason for the surge in the number of closures of online stores in South Korea, he saw a report from Yonhap News Agency.

The Yonhap News Agency report mentioned that the latest Korean e-commerce market trend report released by IGAWorks Mobile Index showed that although the cumulative new downloads of Temu and AliExpress APP from the beginning of this year to November reached 18.04 million and 6.58 million respectively, the total downloads reached more than half of the total population of South Korea. However, Temu's monthly active users are only 5.82 million, less than one-third of the cumulative downloads (based on November data).

( Photo source: Yonhap News Agency )

In terms of credit card payment market share, as of November, Temu and AliExpress had 0.7% and 3.4% shares respectively, up significantly from 0.4% and 1.3% in January. However, the monthly churn rate of Temu users is as high as 37%-50%.

Among other Korean local platforms, Coupang ranks first with 53.8% of the credit card payment market share, GMarket, a platform under Shinsegae, ranks second with 7.9%, and 11 Street and SSG.com rank third and fourth with 7.4% and 5.1% respectively. In terms of monthly active users, as of November, Coupang has 31.59 million monthly active users and a monthly credit card payment amount of 3.14 trillion won.

Based on the above data, IGAWorks Mobile Index believes that although Temu and AliExpress have developed in South Korea, their impact on the 'big market' is minimal.

In addition, a survey by Wiseapp Retail Goods, a Korean mobile application analysis service provider, also showed that the total transaction volume of AliExpress in South Korea in the first quarter of this year was 819.6 billion won (about 4.3 billion yuan), while the total transaction volume of Temu was 91.1 billion won.

During the same period, Coupang's transaction volume ranked first among all e-commerce platforms, reaching 12.7034 trillion won, while Gmarket (including Auction) ranked second with 3.5548 trillion won, followed by 11street (2.0631 trillion won), TMON (1.8435 trillion won), WeMakePrice (773.6 billion won), etc.

Judging from these data, there is still a lot of room for Chinese platforms to improve in the Korean e-commerce market.

Out of desperation, Korean platforms also began to raise prices

Although according to the data of IGAWorks Mobile Index, Temu and AliExpress still have a lot of room for development in South Korea, the local platforms in South Korea have already felt the crisis. In addition, due to the impact of inflation in recent years, the Korean people have become more sensitive to prices, and the local platforms in South Korea have also shown a trend of engaging in "price wars".

During this year's year-end peak season, major local platforms in South Korea have tried their best to attract more consumers by lowering prices, issuing coupons, and launching special offer areas.

Taking the "Big Smile Day" and "Grand Eleventh Day" promotions launched by Gmarket and 11Street as examples, Gmarket proposed the slogan of "the lowest price on the entire network", carefully selected sellers with strong price competitiveness to participate in the event, and borne the cost of discount coupons to reduce the pressure on sellers; 11Street launched the "9900 won store" area to sell discounted daily necessities, and implemented stricter price monitoring on sellers to ensure that sellers do not arbitrarily raise the event prices.

The relevant person in charge of 11Street said at the time that he hoped that this year's year-end promotion would be more attractive than ever before. This promotion did not disappoint the platform's expectations. According to the data released by the platform, the monthly active users of 11Street reached 9.23 million in November this year, an increase of 18% month-on-month, ranking second among all e-commerce platforms in South Korea; at the same time, the platform's e-commerce transaction volume in November soared 438%.

Of course, in order to improve their business capabilities, Korean e-commerce platforms have not only worked hard on price competition, but also on logistics. For example, Coupang has strengthened its logistics advantages through rocket delivery services to support local store operations; 11Street has launched the latest free family membership plan; Naver e-commerce platform provides 'same-day delivery' service, and points will be compensated if there is a delay; Gmarket has also launched 'Star delivery' next-day delivery service in cooperation with CJ Korea Express, and points will also be compensated in case of delays.

In general, the Korean e-commerce market is currently showing a complex and changing pattern. The surge in the number of online store closures and the fierce competition among e-commerce platforms have made the market trend unpredictable. Despite the fierce market competition, the growth potential of the Korean e-commerce market is still huge. As Chinese sellers, facing such a market environment, they need to pay more attention to market dynamics and flexibly adjust strategies to cope with the ever-changing market environment.

E-commerce market

South Korea

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