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Amazon About to Land in Korean Market
Big Impact Expected?
Amazon About to Land in Korean Market
  • By Michael Herh
  • July 31, 2017, 15:45
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The Korean retail industry is in a mood to evaluate that Amazon’s entry into the Korean market will not have a big impact on the local retail industry.
The Korean retail industry is in a mood to evaluate that Amazon’s entry into the Korean market will not have a big impact on the local retail industry.

 

It is said that the world's largest e-commerce company Amazon.com is about to enter the Korean market. Watching Amazon’s moves carefully, the local retail industry is in a mood to evaluate that Amazon’s entry into the Korean market will not have a big impact on the retail industry.

According to the distribution industry on July 31, Amazon Korea recently hired dozens of full-time employees, including marketing, sales, technical support and service support related to online shopping business. It was also reported that the company had a discussion with one of Korean financial companies in relation to electronic payment settlement. It is presumed that Amazon’s Korean branch is preparing to engage e-commerce business in Korea.

A speculation that Amazon will launch its e-commerce business in the Korean market has been steadily raised over the past four to five years. But the global e-commerce giant never officially announced its plans to advance into the Korean market. In the past, Amazon.com was involved in the Korean market. In the late 1990s, strategic partnership was forged with a large Korean company to tap into the Korean market but the partnership did not pay off.  It was also known that Amazon was discussing alliance with Korean open market companies in the late 2000s.

Currently, Amazon is engaging in the cloud service business (Amazon Web Service) and overseas shopping (Amazon Global Selling) only and is not doing the e-commerce business (Amazon.com) in Korea. Now, when Korean consumers buy goods at Amazon.com, they are shipped to Korea from a US or European distribution center, and no Korean Amazon website is in operation.

The reason why a rumor is going around that Amazon will enter the Korean market again is that Amazon Korea recently expanded its workforce and has been showing interest in the Asian market once it started its business in Singapore. Amazon also launched its “Prime Now” delivery service on July 27. Prime Now is a paid membership service that delivers daily necessities and groceries within two hours after an order is placed. So far, Amazon had shipped goods from Europe and the United States when a customer orders goods from Southeast Asia. But its logistics center in Singapore can offer the Prime Now service in Singapore these days.

With Amazon entering Southeast Asia with Singapore as a bridgehead, it is said that Korea is now the only remaining market in Asia with India. Amazon is already showing a rapid growth in Japan and failed to land in China.

In Japan, Amazon recorded annual double-digit sales growth, making itself Japan's number one e-commerce company. According to Japan’s Nihon Keizai Shimbun, Amazon's Japanese subsidiary, Amazon Japan, posted 1.174 triillion yen in sales in fiscal 2016, an increase of 17.5 percent over the previous year. Overall, while Japan's distribution business went downhill, Amazon Japan put up a good fight.

In China, Amazon took over a Chinese e-commerce company in 2004 and started its shopping mall service but failed by losing the market to local companies like Alibaba. Amazon's share in China is less than 1%.

"There are not many markets among developed Asian countries that Amazon has not entered yet," said an official of the Korean e-commerce industry. "Korea is an attractive place in all aspects, including the Internet and the level of consumption. It is a virtually scheduled procedure for Amazon to make a foray into the Korean market because of Korean people’s big interest in Amazon."

However, Korean e-commerce companies’ vigilance against Amazon, the global e-commerce giant, is not that great. Analysis is strengthening that Amazon will not succeed in Korea as Wal-Mart failed and withdrew from Korea.

Most of all, in Korea, e-commerce and Internet business companies are already dominating the e-commerce market. Existing Korean e-commerce companies such as G Market, 11th Street, Interpark, Coupang, Ticket Monster, and WeMakePrice have fast and cheap shipping services, such as same-day shipping and next-day shipping. This means that Amazon will hardly make profits in this market.

In particular, as for Amazon Prime Now, customers have to pay US$6 for the service when you buy less than US$40 worth of products. It is not clear how many Korean consumers who are stingy about paying shipping cost will pay for the service.

The fact that Coupang was charged with violating the Cargo Transportation Act while carrying out rocket-like speedy deliveries is also a variable Amazon has to pay attention to. Coupang won a lawsuit filed by courier companies, but does not receive a commission for rocket-like speedy deliveries to prove that rocket-like speedy deliveries do not belong to the transportation business.