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Naver, Daum Kakao to Mount Challenges to Google, Apple, Amazon in E-commerce Market
e-Commerce Competition
Naver, Daum Kakao to Mount Challenges to Google, Apple, Amazon in E-commerce Market
  • By Jack H. Park
  • January 8, 2015, 02:41
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Naver is actively seeking to strengthen its online payment system by revamping its organizational structure, which shows the company's willingness to enter the local e-commerce market. In light of Naver's move, other IT enterprises' penetration into the market is likely to swing into high gear.

As the payment services are expanded to the mobile customized payment area, the competition between local IT and foreign financial technology (fintech) companies is expected to heat up.

According to sources at Naver on Jan. 7, the Korean web giant spun out its payment services unit in April 2014 as an independent company. Naver already built payment service called Naver Checkout, but it is planning to strengthen related services through this spin-off company.

Previously, consumers were able to purchase products at affiliated stores through Naver Checkout using their Naver ID. Currently, there are 40,000 affiliated stores, and the company is planning to increase the number.

Daum Kakao, on the other hand, launched mobile shopping app KakaoPick last year, which integrates the user base of KakaoTalk with mobile commerce services. Afterwards, simple payment service KakaoPay was released, and the company made an attempt to connect the two services.

As the transactions of mobile shopping related to the fintech sector are increasing, the growth of the e-commerce market is getting a lot of attention.

Market research firm Forrester Research predicts that the U.S. e-commerce market using mobile devices will amount to US$31 billion (34 trillion won) in 2016, a more than ten-fold increase from the US$3 billion of 2010.

As the market is expected to expand, global IT giants like Google have started to strengthen their mobile-oriented e-commerce businesses. Since 2010, Google has consistently bought many shopping-related companies involved in mobile payment platforms, social commerce, and delivery services to prepare for its entry into the e-commerce market.

In 2012, the search engine giant changed its online product search service Google Shopping into a subscription-based service, and acquired e-commerce company Channel Intelligence in 2013 to strengthen its online shopping services. The number of searches on Google Shopping using smartphones grew 3.5 times year-on-year.

Experts are pointing out that the competition between Google and Amazon is becoming more intense with the launch of the Internet search giant's new services, and the phenomenon is likely to affect the local e-commerce market as well.

In addition, the number of local startups using mobile platforms is increasing rapidly. Currently, there are dozens of firms, including shopping price comparison apps RedLaser and ShopSavvy, as well as a number of mobile coupon apps.

An industry source explained, “The e-commerce market, where searches for products and payment can be made through one-click services using mobile devices, provides an opportunity to generate new profits.” The source concluded by saying, “Local business operators like Naver and Daum Kakao are making efforts to provide their own payment and mobile shopping services. However, compared to foreign companies, the local industry has a long way to go.”