e-Commerce Competition

 

In May 2010, the social commerce market was created by TMON, and with the participation of Coupang and Wemakeprice in the same year, a full-scale competition has started in the market. Four years after the creation of the market, three companies are still operating at a loss while fiercely competing with one another and investing hundreds of billions of won.

There is no dominant player in the market. As they sell similar products and operate in a similar way, the amount of money companies spend in advertising, free shipping, and discounts determines their market share. Therefore, when they hire a popular celebrity as a commercial model or raise discount rates, their market share rises temporarily. However, rankings in the market change when they reduce or discontinue spending in ads or coupons. For this reason, observers say that market dynamics will only change when any firm lags behind in marketing competition based on financial firepower.

Coupang is in an advantageous position in the market, since it attracted US$300 million on Dec. 11. It is very important to introduce new services early, due to the nature of social commerce companies. Thus, this investment is expected to be an opportunity to dominate.

The firm is also performing well in the number of unique visitors, which helps assess the market share of each company. According to market research firm Nielsen Korean Click, Coupang recorded 12.04 million people in the number of unique visitors in December of last year, and therefore it gave the top spot to Wemakeprice with 12.73 million visitors. However, Coupang reclaimed the #1 position in December of this year by securing 12.35 million users, beating Wemakeprice's 12.34 million users.

Experts are saying that Coupang's exponential growth will continue, but next March will be a watershed moment for the company, when it will be forced to release an auditor’s report due to a revision in related laws. Unlike TMON or Wemakeprice, which regularly issues an auditor’s report, Coupang does not disclose exact transactions or sales numbers. As a limited liability company, there is no obligation.

Nevertheless, the power of Wemakeprice and TMON cannot be ignored. Huh Min, founder of Wemakeprice and its holding company Wonder Holdings with 1 trillion won (US$904.7 million), owns a 100 percent stake in Wemakeprice, with TMON wholly owned by the world's largest social commerce site Groupon. It means that the two companies have enormous financial firepower. In particular, Wemakeprice was recently sought after by a few companies, which expressed their desire to make an investment worth hundreds of billions of won in the social commerce firm. The two companies can also make a quick decision and enter a long race, unlike Coupang, which has multiple investors and must consult with all of them.

Industry analysts are saying that competition among social commerce companies for market dominance is expected to grow more intense, since the social commerce market could grow further, stemming from a drastic increase in the mobile population. In 2010, only 50 billion won (US$45 million) was transacted in the market, but the market was estimated at 800 billion won (US$724 million) in 2011. The market is projected to reach 5 trillion won (US$4.5 billion) this year. It is growing exponentially, in light of the fact that the big three online auction and shopping mall websites Gmarket, Auction, and 11 Street, which lead e-commerce, were able to reach 15 trillion won (US$13.6 billion) 15 years after their establishment.

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