In the latter half of this year from July to November, the top-ranked app in domestic shopping categories for downloads, according to data from IGAworks, is the Chinese app Temu. Temu’s monthly active users (MAU) have surged sevenfold in just three months. The market share of AliExpress, the overseas direct purchasing platform of China’s Alibaba Group, in the domestic direct purchasing market reached 26.6 percent last year. Chinese e-commerce giants such as Alibaba’s AliExpress and Pinduoduo’s Temu are intensifying their efforts in the South Korean market, leveraging the formidable financial strength of their parent companies.
According to sources in the retail industry on Dec. 25, AliExpress is reportedly considering the establishment of a new external communication organization, including promotional activities, as sales in South Korea have seen a rapid increase. According to mobile market research firms WiseApp, Retail, and Goods, AliExpress ranked third in MAU last month with 7.07 million, following Coupang and 11Street. This marks a doubling from a year ago when AliExpress’s MAU was at 3.43 million.
Looking solely at the direct purchasing market, AliExpress’s upward trajectory is even more pronounced. Its market share, based on transaction volume, leaped from 16.0 percent in 2020 to 26.6 percent last year. It is estimated to have surpassed the 30 percent mark this year. In comparison, Coupang’s market share in the online retail market, based on transaction value, was 24.5 percent last year.
Pinduoduo, the fastest-growing e-commerce platform in China, made its debut in the United States in September last year with Temu, and it is rapidly entering the South Korean market with significant financial strength. It is even distributing coupons like “Get 300,000 won (US$230) for free just by signing up.”
Concerns within the domestic retail industry regarding the onslaught of Chinese e-commerce are centered on the fact that there is a diminishing psychological resistance to Chinese products. An industry insider in the e-commerce sector mentioned, “A significant portion of daily consumables purchased online or at stores like Daiso are made in China. AliExpress and Temu supply products at incredibly low prices by eliminating intermediate distribution. If the perception spreads that products bought on a whim turn out to be surprisingly good, AliExpress and Temu could dominate the shopping habits of domestic consumers.” There is also a possibility that South Korean consumers familiar with AliExpress may transition to Alibaba Group’s luxury shopping platform, Tmall.
Professor Kang Hyoung-goo from the department of finance at Hanyang University Business School expressed concern, stating, “Considering the current situation where domestic companies like Coupang are facing the risk of pre-regulation under the Online Platform Law, we are at a crucial crossroads. Only overseas e-commerce platforms not subject to domestic regulations can reap the benefits.” If the Online Platform Law is passed in the year-end temporary session, and companies like Coupang, Naver, and Kakao could be designated as monopoly operators, so there could be restrictions on the use of services like Coupang Pay and Naver Pay due to the strict prohibition on special treatment of affiliates in Online Platform Law.
In the context of the reasons cited by some civic groups for the enactment of the Online Platform Law, it has been noted that AliExpress, Pinduoduo, and others are not subject to any restrictions in terms of personal information protection issues. AliExpress, for instance, has already surpassed 6 million domestic subscribers.
An industry insider in the IT sector said, “The artificial intelligence technology of Chinese big tech companies like Alibaba Group is on par with that of the United States. Especially, China’s retail AI technology, optimized for individual shopping habits, is unparalleled. Therefore, there is a high possibility that they will expand into the South Korean market not only with cost-effective products but also with high-end product categories.”