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🇰🇷 Countering the Surge of Ali, Temu, and Shein: E-commerce's Bold Investment Strategy



Fighting Fire with Fire: South Korea's E-Commerce Giants Ramp Up Investments in Response to Chinese Platforms.

In the face of rapid expansion by Chinese e-commerce platforms such as AliExpress, Temu, and Shein—collectively known as C-commerce—major South Korean players like Coupang and Naver are aggressively stepping up their investment game.


Rise of C-commerce in Korea

As of April 2024, the monthly active users (MAU) for these C-commerce platforms reached a total of 14 million in South Korea: AliExpress at 6.68 million, Temu at 6.93 million, and Shein at 600,000, according to mobile data platform MobileIndex.

The recent surge from China's direct purchase market is estimated at about 3 trillion KRW (approximately 2.46 billion USD), surpassing the annual revenue of Coupang back in 2017, which was shortly after they launched their Rocket Delivery service. In comparison, the growth rate of C-commerce platforms in the first quarter of this year was 54%, significantly outpacing Coupang's own product commerce revenue growth of 20% during the same period.

AliExpress is making significant inroads into the Korean market by launching services like K-Venue, which welcomes a large number of Korean companies including CJ CheilJedang, and expanding into categories such as electronics, food, and processed foods with offers like fee waivers and free shipping for large items. Additionally, Alibaba Group, the parent company of AliExpress, plans to invest approximately 1.44 trillion KRW (about 1.17 billion USD) over three years in South Korea, including a 200 million USD logistics center and a substantial consumer protection fund of 100 billion KRW.

Professor Jeong Yeon-seung from Dankook University comments on the disruption caused by Chinese online platforms: "As Chinese online platforms accelerate their market penetration, local players like Coupang are seeing a significant erosion of sales, which is causing chaos in the retail distribution order. This could extend damage to manufacturing, logistics, and services sectors if the dominance in online distribution continues to shift."


Korean commerce on the other hand

Despite the challenges, Coupang recorded a 28% increase in revenue in the first quarter of this year, totaling 9.45 trillion KRW (about 7.14 billion USD), although operating profit fell by 61% from the same period last year, and they reported a net loss of 24 million USD.

Meanwhile, Naver, which also leads the e-commerce pack in South Korea, saw its commerce revenue jump by 16.1% to 703.4 billion KRW in the first quarter of this year. This was boosted by the introduction of guaranteed delivery and new revenue streams from brand solutions and acquisitions such as Creme and Soda, which are contributing to its growth.

As for upcoming plans, Coupang announced last month a massive investment of over 3 trillion KRW from this year until 2026. They aim to establish and operate logistics centers in eight regions across the country, including Gyeongbuk Gimcheon, Daejeon, Ulsan, and Chungbuk Jecheon, and extend their free Rocket Delivery service to 50 million nationals by 2027.

In response to C-commerce, Gmarket has also upped the ante by investing 100 billion KRW in their Big Smile Day event, targeting 1 trillion KRW in transactions from a single discount event. This has attracted participation from over 200 major brands.

The industry is abuzz with the potential for local e-commerce firms to gain an upper hand by increasing the range of quality-assured local products and expanding membership loyalty benefits, particularly as Chinese commerce faces consumer hesitancy due to issues like harmful substance scandals.

A Gmarket official emphasized their competitive edge: "As Korea’s first-generation domestic open market, we are expanding our product competitiveness through strong partnerships with top sellers and brands, ensuring a trustworthy shopping environment where customers can shop with confidence thanks to our tech-based price competitiveness."

The shifting dynamics in the e-commerce industry underscore the intense competition and strategic shifts, indicating that the battle for online retail supremacy is far from over.

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