South Korea: e-commerce set to double by 2021. What are the opportunities for UK businesses?
With a population of only 50 million, it’s perhaps surprising that South Korea has the fourth-largest economy in Asia. Home to the likes of Samsung and Hyundai, it’s seen by many as one of the most innovative countries in the world. South Korea was the very first country to fully transition to high speed internet in 2005; while the average global internet speed dwindles at 6.3Mbps, South Koreans enjoy an impressive 27Mbps. The perfect environment for e-commerce.
Mobile is certainly the way things are done in South Korea, with 81.6% of all internet access coming from smartphones. By 2021, this figure is estimated to increase to 88%. It’s also worth noting that watching video on the move seems to be a growing trend, with 31% of South Koreans saying they watch video on their smartphones every day.
“In Korea, mobile shoppers have exceeded online shoppers for several years. Some big e-commerce companies also run delivery companies to make the delivery faster. It usually takes a day, but some items can even be delivered within a day.” Heewon, Oban LIME (Local In-Market Expert), South Korea
E-commerce is set to rise steadily in South Korea, doubling by 2021 at £25.5bn. Some of the most popular online shopping sites currently include 11st, Gmarket, Auction and Interpark, but what should online UK retailers know before they consider expanding in South Korea?
Unlike its neighbour, South Korea has opened its doors to the world. It currently has free trade agreements with 75% of the world economy and is the only G20 nation that trades freely with the United States, China and the European Union.
Credit cards and bank transfers common, with e-wallets on the rise
Credit card use is commonplace in South Korea, with each household owning 4 cards on average. Visa and Mastercard are prevalent, but South Korean card brands such as KB Kookmin and Shinhan are also popular. Money transfers and electronic fund transfers are also extremely common among consumers.
While credit cards are well established, the authentication process which most banks use (using Active X in browsers) has recently been abolished. This means payment methods like PayPal and Alipay have started to gain serious traction. Users can attach their credit cards to these e-wallet accounts and carry on using them without the need for third party authentication.
Social media and online search popular
Much of South Korea’s success overseas is due to social media, with users of Kakaotalk, Facebook and Kakaostory expected to increase by 700,000 annually for the next few years. Naver is the dominant search engine with a 77% share of all searches in 2015. Daum lags behind it with just over 19%, and Google only attracts 2% of searches. For brands looking to advertise online in South Korea, these are the search giants to deal with.
Email marketing is also alive and well, with 12% of recipients having opened an email and made a purchase in 2015. It’s also worth noting that 29% of South Koreans like to track their order, which signals that delivery speed and punctuality are important if you’re looking to ship to the country.
How non-native brands are succeeding in South Korea
According to the UK Government, over 150 British companies currently do business in South Korea, with well-known brands including Asos, Pandora and Burberry experiencing great success.
Luxury brands such as Gucci, Chanel and Louis Vuitton have used product placements in Korean TV dramas to appeal to young consumers, with Celine dresses and Jimmy Choo shoes seeing spikes in sales after being worn by an actress in a popular soap-opera.
Over half of the Global Fortune 500 firms are established in the country, with luxury goods and status symbols from far and wide becoming must haves in Asia’s increasingly fashion-centric markets.
While there is an established market for UK and other non-native brands, it seems that integrating into South Korean culture is also an important consideration. Starbucks successfully changed the lettering of a store into the Korean alphabet Hangul when they moved into an old area of central Seoul, and redecorated the store in traditional Korean style.
Key takeaways before going to market:
- Be strong on mobile: Over 88% of the country will use mobile to access the web by 2021.
- Delivery is important: Over a quarter of South Koreans track their deliveries – get it right.
- Pop culture is strong: Potential point of entry for fashion and luxury brands.
Contact us today to see how we can help your business explore new markets like South Korea.