eCommerce: South Korea
eCommerce in South Korea: Market Development & Top Online Stores
South Korea is great at digital connections, making it a perfect place for online shopping. Find out how the best online shops take advantage of this environment that's in tune with technology.Article by Yokany Oliveira | January 08, 2024
eCommerce in South Korea: Key Insights
Coupang's Strategy for Success: Fast delivery to accommodate the country's fast-paced lifestyle, a premium subscription service with member benefits and an own streaming platform.
Lotte Hi-Mart's Diverse Inventory: Lotte Hi-Mart has primarily achieved success by selling electronic goods. It has also embraced digital transformation and omnichannel strategies to improve the shopping experience for its customers.
Shinsegae (SSG) and Consumer-Centric Strategies: SSG has focused on strategic partnerships and launched an open marketplace for individual sellers or retailers. To its customers the company offers recurring discounts, which consolidate SSG's standing in South Korean eCommerce.
With its exceptional internet penetration rate, outstanding mobile device usage, and overall digital connectivity, South Korea provides a fertile ground for eCommerce.
So how are businesses taking advantage of this favorable backdrop to promote online sales? Our article delves into the tactics employed by the country's premier digital retailers.
South Korea’s eCommerce Market at a Glance
South Korea is the fourth largest eCommerce market, ahead of Japan. The eCommerce market of the country is poised for steady growth in the coming years. The expected Compound Annual Growth Rate (CAGR) from 2024 to 2028 is 2.71%, leading to a projected market value of US$86.16 billion by 2028.
In terms of key players, coupang.com emerged as, by far, the leading online store in 2022, with an impressive revenue of US$18.25 billion. This is followed by e-heimart.co.kr with a total revenue of US$1.34 billion, ssg.com with US$1.33 billion, gmarket.co.kr with US$1.06 billion and, finally, nike.com with US$1.04 billion.
In order to fully understand a market, it's a good idea to have a closer look at its top players. In South Korea's case, those are Coupang, Lotte Hi-Mart and Shinsegae. Let's zoom in on these online stores and find out what makes them special.
Coupang: South Korea’s Amazon Equivalent and its Fast Delivery Strategy
Coupang was founded in 2010 by Bom Kim, a Harvard Business School dropout. Since its humble beginnings, the company has worked its way up to being South Korea's leading eCommerce company.
Coupang has positioned itself as the go-to store for Korean households, offering a wide range of products through its online store (coupang.com). One of the company's key differentiators is their commitment to fast delivery, catering to the high demand for quick service in South Korea's fast-paced lifestyle known as the Ppalli Ppalli culture.
To meet customers' expectations for fast delivery, Coupang introduced its "rocket delivery" service in March 2014, which promises to deliver products to customers' doorsteps within hours or the next day.
In addition, the company offers a premium subscription service called Coupang Wow, which provides members with exclusive benefits such as faster shipping and exclusive offers, ensuring a smoother shopping experience, from the online store to the shopper's doorstep, in line with its "wow" motto.
Coupang's focus on delivery and logistics infrastructure plays a critical role in its distribution strategy. The company has established strong relationships with suppliers, third-party vendors, technology partners, and logistics providers to improve its operational efficiency and service quality.
Interestingly, by October 2021, Coupang had a workforce of more than 59,000 employees in South Korea. This number includes delivery workers directly employed by Coupang, as opposed to those associated with subcontracted delivery companies.
Beyond its core eCommerce business, Coupang is making significant investments in its video streaming service, Coupang Play, to compete in South Korea's competitive over-the-top (OTT) market.
Launched in December 2020, Coupang Play operates on a subscription model similar to well-known OTT platforms such as Netflix and Apple TV. In 2021, Coupang's OTT offering became an additional benefit worth US$2.40 (KRW 2,900) per month for Coupang's WOW members and online shoppers. This bonus was packaged with benefits such as cash back and guaranteed delivery services.
These strategic moves follow the company's successful debut on the U.S. stock market, where it raised US$4.55 billion. Overall, Coupang's commitment to fast delivery, extensive product line, and strategic investments in related services have fueled its growth and success in the South Korean market and beyond.
Lotte Hi-Mart: Online Store Updates and Diverse Inventory
Lotte Hi-Mart operates as part of the Lotte Group, one of the largest conglomerates in South Korea, known for its strong brand presence and reputation in various industries, particularly retail and consumer goods.
One of the key factors contributing to Lotte Hi-Mart's prosperity is its wide and diverse product range. The store offers an extensive selection of consumer electronics, home appliances, gadgets, and other technology-related items.
This diverse inventory appeals to a broad customer base and generates sales by catering to the needs and preferences of consumers.
Recognizing the importance of digital transformation and eCommerce in today's retail landscape, Lotte Hi-Mart has made strategic investments in online sales platforms and omnichannel strategies.
By embracing these technological advancements, the company has improved its performance, expanded its reach to online shoppers, and created a seamless shopping experience across channels.
Together, these factors have helped Lotte Hi-Mart solidify its position in the Korean market and maintain its success as a reputable and customer-centric retailer.
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Shinsegae: Collaborations and Consumer-Centric Strategies
Over the years, Shinsegae has focused on developing strategic partnerships. In April 2021, the conglomerate launched an open market service for individual sellers or retailers to sell external products on its platform (ssg.com).
In order to register individuals provide their ID via a mobile phone. By simplifying the registration process, Shinsegae has managed to attract small and medium enterprises. Through their marketplace, these SMEs can register, promote and manage their products.
But SSG is also known for offering attractive discounts to its customers. For example, from March 25 to March 31, 2021, ssg.com had launched a promotion offering a 50% price deduction to customers who ordered fresh food overnight from Shinsegae's other retail subsidiaries in Seoul and the metropolitan area.
At that time, the company also announced that it would regularly offer the same promotion every second and last week of the month. These are just some of the strategies Shinsegae is using to retain its customer base.
Sources: NY Times, Business Korea, Statista, ECDB