Putting Korea e-Commerce Players on Red Alert
Alibaba Group’s 1688.com will open its platform in South Korea in February next year with a local partner in Korea. 1688.com is a business-to-business (B2B) platform with high price competitiveness and a wide range of products.
KOSDAQ-listed Neorigin recently formed DC Virus, a joint venture with Chinese retail and media company HMG, according to industry reports on Dec. 3. HMG, of which Neorigin is the second-largest shareholder, was recently granted non-exclusive business rights for 1688.com in Korea by Alibaba Group. DCVirus will be responsible for launching and operating a 1688.com platform in Korea.
The target month for the platform launch is February 2024. The platform will integrate 1688.com’s application program interface (API), a Korean menu and search functions, and a payment system for Korean customers. DCVirus are preparing to reflect product options and inventory as well as communicate with local sellers in Korea in real time. The product range, inventory, and pricing will be the same as 1688.com in China.
1688.com is China’s largest B2B platform. With its global lowest prices and vast product range, many local e-commerce sellers utilize it as a channel for purchasing goods. Analysts say that 1688.com began to promote the launch of its Korean platform with the growth of the Korean e-commerce market during the COVID-19 pandemic, coupled with a surge in purchases from 1688.com by Korean dealers. In fact, 1688.com also runs localized platforms in Japan and Thailand, with partners.
The opening of 1688.com’s Korean platform is expected to have a significant impact on Korean cross-border buyers. Until now, Korean sellers have been paying 3 to 10 percent commissions to overseas purchase agencies to buy 1688.com products. If the Korean platform is opened, Korean sellers will be able to significantly lower their dependence on such overseas purchase agencies.
Korean e-commerce B2B platforms are also expected to be affected. This is because wholesale sellers often buy goods in bulk from China. The Korean 1688.com platform reportedly will not charge any fees other than the actual cost of logistics and customs clearance. The majority of Korean e-commerce companies are likely to struggle in a price war.
The influence of Chinese e-commerce is expected to grow further in Korea as B2B platforms also try to enter the nation. In the case of business-to-consumer (B2C) platforms, Aliexpress, Temu, and Shine are rapidly expanding their market shares in Korea. According to mobile market research firm WiseApps, Retail and Goods, Aliexpress had 6.13 million monthly active users (MAU) last month. Temu also had 2.65 million MAU last month, a five-fold increase from August.
“It is no exaggeration to say that more than 90 percent of industrial products selling in the Korean online open market are sold on Chinese platforms,” said an e-commerce industry insider. “If B2B platforms overcome language and delivery barriers, major changes will be definitely made in the Korean e-commerce market structure and pricing system.”