Challenges and Opportunities in Korean E-commerce Market

Korean e-commerce faces challenges; Alibaba's image and sales stagnate, while local companies thrive.

### Current Status and Future Prospects of Alibaba and Tencent in the Korean Market
* 📉 The number of monthly active users of AliExpress and Taobao has been decreasing, with users who downloaded the app not even attempting to access it, and the **purchase conversion rate remaining low**.
* ❌ The platforms' image issues, such as **cheap and low-quality products posing health risks**, have led to a **significant decrease in trust** and **deteriorated brand perception**.
* 🛒 Despite the media attention, marketing expenses, and flashy advertisements, the platforms have not been able to exert as much influence in the Korean market as **expected**.
* 🇨🇳 The Chinese government is providing **massive financial support** to Alibaba and Tencent, with the goal of **expanding these e-commerce platforms globally**.
* 🛍 Alibaba's strategy to expand through direct purchases faces challenges due to the **fixed number of customs officers**, leading to difficulties in **rapidly increasing sales in a single country**.
* 🍎 Fresh food is one category that sells well on AliExpress, as it is perceived as a **cost-effective platform**. However, the lack of a **cold chain system** and **government approval** is a **major obstacle**.
* 🌐 Tencent is gradually retreating from the U.S. and Europe, and it is speculated that a **significant amount of Chinese capital** could be invested in South Korea in the future.
* 🇰🇷 South Korea's measures, such as import bans, are seen as **impulsive and unlikely to have a significant impact**. A more comprehensive and carefully considered policy is needed to ensure that consumers benefit from competition among companies and small business owners relying on exports can survive.

Ali and Tae can swallow up the Korean market. Domestic e-commerce companies are facing a significant challenge. The growth was too fast, and it seemed like a fierce wave was coming, but when they opened it, it wasn't as explosive as expected. It's not as strong as thought, but it's intense. It's an issue hotspot, Baek Jong-won's ear. Today, shall we share the current status of Ali and Tmall, the e-commerce giants in China? Well, honesty is not as abundant as the numbers. To find out how Ali and Tae are currently doing in Korea, I have prepared some indicators. Monthly active users, what is it? It literally refers to the number of people who access this app at least once a month. Earlier this year, when this item was mentioned, it was said that Tae would flip 11th Street and rise to third place, almost.

Most experts expected that there would be a fourth wave by June. What's more serious is that the number of users of Alitamu has decreased for two consecutive months. It's being said that people who downloaded this app are not even trying to access it. If the number of users who have downloaded the app decreases, what happens if only revenue increases? It's not just about increasing the average sales amount. However, looking at the current revenue, all the team members up to 1, 2, 3, 4 are all domestic companies. Even though Ali is so noisy and bustling, it is doing business in Korea, but the team members are not coming out more than expected. So, it's just stopping at window shopping. It is becoming more evident that the phenomenon of not leading to purchases is increasing. There is something called a purchase conversion rate. If you look at the probability of people who go into the actual app and make a purchase, it becomes more serious when you consider how many people actually make a purchase. Coupang is around 78-88%.

So, out of 100 people, about seven to eight people make a purchase. This is significantly higher than Coupang's 1.3% average discount rate. Although the number of people receiving discounts from Ali and Tae is high, in terms of actual purchase conversion rates and revenue, it is quite low. Looking at it this way, the e-commerce platforms that seemed to swallow up all of Korea are now unable to exert that much power. Despite all the attention from the media, flashy advertisements, and huge marketing expenses, why didn't it explode? Why are the results gradually coming out like this? This is a typical issue of the platform's image itself. Products from Ali and Tae are cheap and of poor quality, even posing risks to health. Continuous data and announcements are coming out about this.

Trust has decreased significantly, and the image has also deteriorated quite a bit. Now there is an analysis. Secondly, e-commerce companies in Korea are not to be underestimated. According to data from the Ministry of Trade, Industry and Energy in April, offline sales in April this year decreased by about 0.2% compared to a year ago. However, online sales increased by 22.2%. There are various reasons for this, but one of the main reasons is that in order to compete against the 10 billion dollar Alibaba Festival, they offered significant discounts, resulting in increased sales. In fact, companies like Coupang reported their first profit in 13 years last year, but there are concerns that they may return to losses this year. The reason for this is directly related to the intense competition with Alibaba.

In Korea, because it's impossible to raise prices, Coupang directly entered China. So, they are directly recruiting Chinese low-cost wholesale distributors through Alibaba and Tmall at Coupang's logistics center in Wei. They are recruiting with very aggressive conditions. Some of the products sold by certain companies are typically things like mobile phone chargers and fast chargers. In the past, there used to be a three to four times difference, but now it's only about 1.5 times difference. From the consumer's perspective, competition like this is always welcome. Ultimately, in Korea, it seems that the market's purification function is working. Since there are many low-quality products, they naturally disappear. This is the case in Korea, and in other countries, are they struggling a bit too? Especially Tmall.

In the same case, the sincerity towards global markets like the United States or Europe is much stronger than the Korean market. As I mentioned earlier, looking at the performance of Taemu in the United States, oh, here is a bit alarming. Until last year, Taewoo showed an incredibly high growth rate, but suddenly it is slowing down in the U.S. market, and reports are coming out from various places. However, it's slightly different from South Korea. The reason is said to be that they are being neglected by consumers. Many people see this as a strategic decision by Taemo headquarters. The biggest reason is that people were shocked to see TikTok being expelled. Seeing TikTok really being kicked out and having to close its business in the U.S. makes us worried that we might also be expelled from the U.S. It could be a big problem if all the money invested so far goes down the drain. We are scared.

With this, they spent an astronomical amount of money on advertising in the United States, promising to deliver all products within a week. They were running at a deficit of a dollar for every $15 they sold, to the point where an analysis came out mentioning the deficit to an extent. Recently, they started tightening the purse strings and decided to stop spending money in the United States. There are talks of moving the logistics center planned for the U.S. to Mexico. In fact, in the fourth quarter of last year, their sales dependence on the U.S. market, out of the global market, was at 57%, but it dropped to 40% in the first quarter of this year. However, they are aiming to reduce this to 10%. They are also considering regulating the products coming in from China, which accounted for about 35%, so now, the overall sales have dropped to around 30% this year.

The market share has decreased to some extent, and there is some anxiety in the U.S. and Europe. It is analyzed in foreign media that eventually, business expansion may no longer be possible here, leading to a shift to East Asia. Strategically, it seems that it may not work well in the U.S. or Europe, and they may be trying to turn towards Asia, including Korea. This is a limitation on selling products in the form of direct purchases. Ultimately, regardless of the country, direct purchases must pass through the customs of that country to enter. The number of customs officers involved in the customs process is fixed. As a result, the orders coming from abroad increase threefold, fivefold, or even sixfold, leading to a surge in orders, but receiving the goods faster becomes increasingly difficult. This leads to a consumer experience, and relying solely on direct purchases.

It's a bit difficult to explosively increase sales in a single country. There are now over 70 countries in the market. They purchase a lot of goods through this platform, not only in Africa, South America, and ASEAN countries but also in the Middle East and Central Asia. However, from the perspective of those countries, they don't have much industrial base to produce such goods anyway. Yet, they offer them at very low prices. In those countries, there is less resistance. They are worried about what if the United States blocks us, but that's not the only concern. Even without the U.S., there are Mexico, Brazil, and Chile to consider. In any case, the way they earn money is different. Recently, China has been trying to overproduce. Is there any relevance to this? There is some concern about that.

That's right. Europe is doing the same, and they are continuing to issue warnings to China. It's said that instead of encouraging Alitewoo as a warehouse to push out these tremendous products that cannot be sold domestically at a national level, there is a need to look at this a bit differently. What needs to be examined is what products are being overproduced. It's necessary to look into items such as steel, aluminum, textiles, electric cars, secondary batteries, and solar panels. It is acknowledged that there is overproduction in steel and aluminum. However, in the case of electric cars, secondary batteries, and solar panels, there is no overproduction. They are denying that there is overproduction. In the case of steel, there are regional autonomous bodies where clusters producing steel are established. Local governments facing financial difficulties are unable to stop these factories from operating.

There is a desire to impose some sanctions in the United States, so they can stop the factories for that reason. However, China continues to produce electric cars, solar panels, and secondary batteries. We are not overproducing, we are objecting. It's hard to believe everything China says 100%. But are there products sold on Alibaba? No, there are not. Products sold on Alibaba are mainly produced by leading large companies related to national institutions and industries, in mass production of a few types of items. However, products sold on Alibaba are produced in small quantities of various types. Therefore, due to overproduction, it is somewhat inaccurate to say that Alibaba is recommended. So why does the Chinese government continue to expand Alibaba to the global market? The reason is that it is politically beneficial. From the perspective of a socialist country like China, this also benefits big companies and capitalists.

It may seem important, but in fact, many ordinary citizens and small business owners are much more important politically. However, as consumption in China stagnates, self-employed individuals and small businesses are facing significant difficulties. These are the people who mainly produce goods and sell them overseas through platforms like Taobao and AliExpress. For many small businesses, these platforms are where they make money. From the perspective of the Chinese government, this is a very favorable business. Moreover, China continues to encourage advanced industries, and platforms like AliExpress, which have fully adopted AI in e-commerce, fit perfectly into this strategy. According to a U.S. study, China has provided support to these e-commerce companies with an equivalent of 2,325.5 trillion Korean won. They have been supporting these companies with a massive amount of money, and now,

China will provide more support, building a logistics center and establishing a logistics system. If we receive financial support from the Chinese government, even if the United States and South Korea hesitate a bit, we can expand through various forms of promotion in the future. It's a situation where we cannot predict what will happen. When this enters Korea, how will it be utilized? There is a part where we can anticipate this. Currently, Ali is not selling many products overall. Demand for direct purchases from China has dropped significantly, and with ongoing quality issues, Korean companies are hesitant to purchase goods from Ali, which are also sold in Korea. From the perspective of these companies, they expected to generate more revenue, but upon entering, they are facing a situation where they are reluctant to make purchases, similar to other domestic platforms in Korea.

There wasn't much of a difference, nothing particularly outstanding in terms of increased sales, and some items were actually selling less. However, in this situation, there is one thing that sells a lot on Ali, surprisingly fresh food. I thought that people would have aversion to fresh food on a Chinese platform, but as prices have recently risen a lot, many people have started buying fresh food on Ali, which is perceived as a very cost-effective platform. There is a significant increase in the number of people buying fresh food there. This analysis is currently emerging. However, there is one major obstacle here. Ali does not have a cold chain. It needs to have a system in place to store these fresh foods, maintain their temperature, and deliver them while keeping the temperature constant. Moreover, they need to obtain approval from the government.

It would be very difficult to set up a system because it's too big. That's the talk going around. That's why, you know, there's talk that Alibaba will acquire Homeplus Express recently. If we only look at the scores, it belongs to the Big 4. If we only consider the capital area, Homeplus Express has the most stores. If Alibaba acquires Homeplus Express, it will at least have the effect of securing warehouses. Of course, the cost of building a system for moving this is quite high, but China can handle it now. Tmall is also gradually stepping back from the U.S. and Europe and benchmarking Alibaba's business model. Well, you know, there are no plans yet, but here, a lot of Chinese capital could be invested now. This is the outlook.

It's coming out, so what exactly is going well or not? You might be curious. Who knows exactly what hasn't happened yet? Currently, the expectations for Alibaba and Tencent in China are shining a bit. However, amidst this, the Chinese government is sincerely investing money continuously to grow e-commerce worldwide. They are setting up long-term plans for the benefit of their country and carefully implementing these steps. Meanwhile, what South Korea is currently presenting as measures seems to be impulsive, with little expected effect. They are coming up with measures like banning imports, making it difficult to expect any significant effects. Consumers should be able to continue benefiting from the competition among companies, and small business owners who rely on exports from South Korea should be able to survive.

I sincerely hope for a policy that is more comprehensive and deeply considered to come out.

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The Impact of Ali and Tmall on the Korean E-Commerce Market

Ali and Tmall's expansion in the Korean market has not been as explosive as expected, with a decrease in monthly active users and low purchase conversion rates.

The poor quality and cheap products from these platforms have led to a significant decrease in trust and a deteriorating image.

Despite their efforts, local e-commerce companies in Korea have shown significant growth, with online sales increasing by 22.

2% and intense competition with Alibaba affecting the profitability of companies like Coupang.

Coupang's Aggressive Expansion and Shifting Focus

Coupang is aggressively recruiting Chinese wholesale distributors through Alibaba and Tmall to enter the Chinese market, facing a decrease in sales dependence on the U.

The company's high advertising spending and sales dependence on the U.

have led to financial concerns and a strategic shift towards Asia, including Korea.

The surge in direct purchases is causing a strain on the customs process, leading to difficulties in fast product delivery.

Alibaba's Global Market Expansion and Overproduction Concerns

Alibaba is facing challenges in explosively increasing sales in over 70 countries, with a focus on offering goods at low prices.

The concern over overproduction is particularly relevant to steel, aluminum, textiles, electric cars, secondary batteries, and solar panels, with China denying overproduction in the latter three.

The expansion of Alibaba to the global market is politically beneficial for China and its big companies, despite the concerns about overproduction.

The Impact of China's E-Commerce Support on Small Businesses

Small businesses in China, especially those selling through platforms like Taobao and AliExpress, are facing challenges as domestic consumption stagnates.

The Chinese government is providing massive financial support to e-commerce companies, with a focus on advanced industries and AI adoption.

Despite a drop in overall product demand, fresh food sales on AliExpress are significantly increasing due to rising prices and perceived cost-effectiveness.

However, the lack of a cold chain and government approval is a major obstacle for selling fresh food on the platform.

Alibaba's Potential Acquisition of Homeplus Express and Its Impact

Alibaba is rumored to be considering the acquisition of Homeplus Express, which holds a strong presence in the capital area of South Korea.

The potential acquisition is expected to help Alibaba secure warehouses and expand its e-commerce system.

Meanwhile, the Chinese government is heavily investing in the growth of e-commerce globally, while South Korea's current measures, such as banning imports, are not expected to have a significant impact.