Opportunities And Threats In Korea’s Blossoming E-Commerce Market
2014 12월 15

E-Commerce in Korea

Social Commerce In Korea Is A hot Topic These Days With Coupang’s Recent $300 Million USD Fundraise – Here’s a Review of the Market from our friends at Business Korea.

In May 2010 social commerce arrived in Korea, thanks to local player, TMON. In the same year two other local players also started operations, Coupang and. Four years later, three companies are still operating at a loss, engaged in fierce competition. Coupang has recently raised $300 million USD and all of the main players are investing heavily in growth to try to dominate the local e-commerce market, the third largest in Asia.

No player currently dominates and they all sell similar products and have a similar operations model. What determines market position is not service or price differentiation, but the amount of money they spend in advertising, free shipping, and discounts. Therefore, when they hire a popular celebrity as a commercial model or raise discount rates, their market share rises temporarily. For this reason, market experts are predicting that dynamics will only change when any of the key players slows marketing activities or runs out of cash.

Coupang is at a strong advantage, since its recent fundraising. With its additional cash reserves it is expected to be able to introduce service updates and maintain high spend on marketing, which could result in a dominant position being carved out in the next six months. In fact the company is already slightly ahead of nearest rival, WeMakePrice, in terms of unique monthly visitors.

While experts believe Coupang's exponential growth will continue, next March is predicted to be a watershed moment for the company, when it will need to release an audit. Unlike TMON or WeMakePrice, which regularly issue audits, Coupang does not need to disclose exact data, as they are still a limited liability company.

WeMakePrice and TMON are not out of the game yet though. Huh Min, founder of WeMakePrice owns a 100% stake in the company (valued at around $900 million USD) and TMON is a wholly owned subsidiary of Groupon, the world’s largest ecommerce company. This means that the two companies also have enormous financial firepower. It is feasible that if WeMakePrice wanted to they could also raise large investments quickly, should additional funding be required.

Industry analysts are saying that competition among social commerce companies is expected to intenify, as the social commerce market is expected to grow into the future. This growth is expected thanks to increasing numbers of consumers on mobile, and an opening of the Korean ecommerce market, to China.

In 2010, only $45 million USD was transacted in the market, despite a total market value of $724 million USD. The market is projected to reach $4.5 billion USD this year.

Edited from original on Business Korea

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