November 23, 2024

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(Korea Herald DB)

Chinese e-commerce platforms, equipped with ultracheap deals, have been gobbling up market share from domestic rivals here. Even as local retailers suggest there has been no serious impact from the Chinese surge, they can be seen ramping up their readiness.

According to market tracker Wiseapp, the monthly user counts for AliExpress, Temu and Shein, three big Chinese players, have continuously been hitting new record numbers in Korea. AliExpress, the biggest among them, saw 8.18 million monthly users in January, more than doubling from 3.55 million users a year prior. Temu and Shein also posted record user numbers of 3.55 million and 680,000, respectively, during the same period.

Even though Coupang, the nation's largest e-commerce platform, maintained its unrivaled market share with 30.1 million monthly users in a country of some 52 million people, AliExpress outpaced other Korean rivals to become the second most-used shopping app among Korean consumers.

AliExpress and Temu are well-known for their competitive pricing and the ability to facilitate bulk purchases. They offer an extensive range of products across various categories, including electronics, fashion, home decor and everyday items.

For example, an iPhone case for wireless charging, priced at around 69,000 won ($52) on Apple’s official online store, can be found for approximately 5,000 won on AliExpress -- about half the price of the same product sold via domestic options Coupang and Naver.

Shein is proving popular as a fast-fashion platform for its affordable clothing, accessories and beauty products that are favored especially among young trend-conscious consumers here.

Their cheap pricing often comes along with scrutiny over quality issues, but many consumers say they do not care.

Park Seung-jun, a 34-year-old office worker in Seoul, who used to frequent local discount store Daiso, now finds himself visiting AliExpress more often.

"I was shocked when I first visited AliExpress because I found the prices on the platform more attractive, and it offers almost everything I needed," Park said. "I also recommended the Chinese platform to my father, who is interested in vehicle decorations and fishing items."

Park added that despite the longer delivery times -- items can take weeks to arrive due to overseas shipping -- he still prefers the Chinese platform over local ones because of its competitive pricing.

The pricing strategy of the Chinese e-commerce platforms is made possible because they introduce items directly from manufacturers to consumers, minimizing intermediary commission fees.

Moreover, since 2018 when China started supporting its domestic manufacturers in exporting amid an economic slowdown, the expansion of Chinese e-commerce platforms into Korea has accelerated.

AliExpress, which commenced operations in Korea in 2018, has recently intensified its marketing efforts.

In addition to offering promotions like free shipping, refunds and discounts, AliExpress has adopted a multifaceted marketing strategy. This includes leveraging well-known actor Don Lee, also known locally as Ma Dong-seok, in a marketing campaign, releasing ads on online platforms such as Naver and establishing partnerships with local payment service providers like Kakao Pay.

However, these Chinese e-commerce platforms are encountering increasing complaints from Korean consumers regarding the quality of products and the prevalence of knock-off items.

"I purchased a smartwatch from Temu last month, but I couldn't connect it to my phone because the Bluetooth function didn't work," said Hwang Chan-hui, a 22-year-old college student.

"I'm currently using the watch as an electronic device to monitor my health status. It's disappointing that I can't fully utilize it as a smartwatch as I had hoped initially, but I believe the process for refunds would require considerable effort," Hwang added.

If consumers who purchased products on the Chinese platforms wish to request refunds, they must return the items to China, which adds more days to the process. Additionally, after-sales services on the Chinese platforms are not yet fully translated to Korean, making accessibility more challenging for consumers here.

Lee Young-ae, a professor of consumer science at Incheon University, emphasizes that overall improvement in product quality and customer service is crucial for Chinese platforms to compete effectively with local competitors and further advance in the country.

"Although AliExpress, Temu and Shein may excel in competitive pricing, there have been numerous instances where Korean consumers have voiced complaints about the quality of products and their after-sales services," Lee said. "If they cannot ensure satisfactory consumer service across all their offerings, consumers will, in turn, find local competitors more attractive."

As issues related to Chinese e-commerce platforms continue to grow, Korean authorities have also taken up response initiatives.

Last week, the Korea Fair Trade Commission conducted a raid on AliKorea, the Korean subsidiary of AliExpress, in central Seoul to obtain data related to its customers. The antitrust watchdog is investigating whether AliExpress has properly complied with its consumer protection obligations under the country's consumer protection law.

The KFTC stated its intention to enhance monitoring of consumer harm, particularly as the number of users on Chinese platforms like AliExpress, Temu and Shein has significantly increased in recent years.

"If there is any suspicion of violating the law, we will respond strictly by immediately initiating monitoring," stated a KFTC official.

Last year, the number of consumer complaints regarding AliExpress received by Voice for Consumers, a nongovernmental organization for consumers' rights, marked 456 -- a fivefold increase from the previous year's 93 complaints.

While AliExpress announced plans to invest 10 billion won to improve product quality on its platform last year, its lack of local logistics centers remains a challenge for further advancement in the country.

"These days, the retail industry in South Korea is dominated by one-day shipping service," commented an official from a Korean e-commerce platforms.

“To service one-day shipping, having logistics centers is crucial. For example, Coupang has more than 100 logistics centers in over 30 cities across the country.”

AliExpress had expressed its willingness to establish large-scale logistics centers in South Korea as of December. However, concrete plans for this initiative have not yet been revealed.

By Hwang Joo-young (flylikekite@heraldcorp.com)
The Korea Herald Business Desk reporter