Local Equivalence
A Korean Economic Research Institute (KERI) report says that since Korea suffers an e-commerce trade deficit amounting to 1.3 trillion won (US$1.1 billion), the country urgently needs a global player equivalent to e-Bay. The figure is also on a steady rise – it stood at 515.0 billion won (US$442.5 million) in 2011, 770.5 billion won (US$662.0 million) in 2012, 1.1244 trillion won (US$996.07 million) in 2013, and 1.3342 trillion won (US$1.1463 billion) in Oct. 2014.
In addition, eBay runs two major Internet sellers in Korea – Gmarket and Auction. The two companies enjoy a combined market share of 65 percent in Korea. U.S.-based Amazon and China-based Alibaba are also planning to make full scale forays into the Korean e-commerce market. Moreover, global search company Google and global SNS Facebook are already becoming more popular in the country. China’s three Internet business leaders – Baidu, Alibaba, and Tencent – are expanding its business scopes into Online to Offline (O2O) and fintech services, such as taxi reservations and food deliveries, in addition to its major business items such as search, e-commerce, and messengers.
Public opinion is preventing Korean Internet portals from entering the e-commerce market, the report explains. Of late, the government has been overhauling systems and making improvements to regulations for the purpose of promoting e-commerce exports and the fintech industry. But controversies are continuing over the possibility that Internet portals will chip away at the market for small businesses and become monopolistic or oligopolistic players.
The report brings up the Naver case. Naver is the leading Internet portal company in Korea. Naver has been under fire for maintaining its monopoly in the search market by offering special services. The research institute claims that Korea is in a situation where it cannot nurture a rival horse in the global e-commerce market due to negative public opinion. “Innovation happens and global competition is on in the e-commerce market,” said a research fellow of the institute. “Korean Internet business firms, including Naver, should be allowed to engage in various sales activities.”
Some, however, are negative about the intention of the Korean Economic Research Institute, which sided with Internet portals such as Naver. This is because the Federation of Korean Industries (FKI), which runs the Korean Economic Research Institute, attempted to bring in mid-sized companies and service firms as its members after announcing that it would take off to be an economic group trusted by the people. In particular, Naver and Daum, which rank first and second in the Internet portal market, refused to join the FKI, although the FKI has made efforts to attract them.
But Naver explained that it was not quite right for them to become a member of the FKI, which represents large companies, as Naver joined the Korea Medium Industries Association and is concentrating on realizing mutually beneficial growth with small and medium-sized companies. Naver is also maintaining a negative opinion on joining the FKI and take the stance of the interests of big companies, since Naver has to work for the development of an Internet ecosystem and mutually-beneficial growth with other companies.