Fueled by the Covid-19 pandemic, South Korea’s online shopping transactions continued to show sustained growth in January 2021 year-over-year compared to 2020.
Why it matters: South Korea over the last few years has exploded into an e-commerce powerhouse, ranking 2nd globally in terms of online shopping per capita rate (51%). Recent statistics show that this trend is transforming the lives of ordinary Koreans.
- As the world emerges from the Covid pandemic, Korea is well-positioned to sustain its enormous growth in e-commerce and online shopping as compared to other countries.
- Factors such as Korea’s small size, heavily consumerist culture, solid logistics, high mobile penetration rate, and “Bbali Bbali” (fast moving) culture contribute to online shopping becoming a dominant force in how Koreans purchase food, household items, and clothes.
The data show: Online shopping in Korea has set records in almost every metric, with mobile device shopping leading the way.
- Our own analysis shows that online shopping grew by over 22% compared to just a year ago. Online shopping using mobile devices also increased by 29.2% and now constitutes over 70% of all online shopping in Korea
- Nikhil Reddy, Banking and Payments Analyst at GlobalData, comments: “The demand for e-commerce has skyrocketed amid the pandemic as wary consumers prefer to stay at home to avoid social contact.”
- Reasons cited by consumers for increased online shopping include social distancing, wanting to stay home, avoiding queues, and store closures (Statista).
Yes, but: Online sales of services, especially Seoul’s large tourism industry as well as cultural and leisure services declined due to lockdown measures caused by the pandemic.
- The Korean government is being proactive in supporting the country’s struggling tourism industry. Innovative yet questionable programs include increasingly popular “flights to nowhere” services, in which sightseeing flights have no destination and instead land back at their departing airport.
- Besides speeding up vaccinations, Korea’s Ministry of Land, Infrastructure and Transport wants to establish “travel bubble” agreements or quarantine-free corridors with other countries, which would circumvent the very expensive 1.4 million KRW quarantine fee imposed on inbound travelers to Korea.
The wider picture: South Korea is approximately the size of Indiana with the population of California. This staggeringly high population density combined with Korea’s cultural propensity for “Bbali Bbali” or quick efficiency heavily incentivizes Koreans (as well as logistics companies) to value speedy delivery.
- Food delivery culture has become one of the strongest parts of Korean consumerist culture. A popular type of content is called “Mukbang”, which is watching an online streamer eat sometimes glutinous amounts of food.
- As the number of single households in Korea increases, the cultural reluctance to eat alone in public has reinforced online ordering of food delivery as well as the restaurants that support it.
Recent events: The South Korean e-commerce unicorn startup Coupang had its IPO on March 11, 2021, resulting in a valuation of $50 billion, which is the largest for a foreign company since 2014.
- Add-on: Market Kurly, an online grocer, is now eyeing its own US-based IPO. Market Kurly is one of Coupang’s fastest growing competitors and was founded by Sophie Kim, a 37-year-old former Goldman Sach’s analyst.
What they’re saying: Analysts and insiders are predicting that the e-commerce industry in Korea will continue to grow in 2021.
- JY Lee, an analyst at NH Investment & Securities puts forth the thesis that the online shopping industry will mature: “Considering Korea’s fragmented e-commerce landscape, we believe the more feasible business model in the Korean online shopping mall market is not that of online malls themselves, but those of providers of solutions for online shopping malls (including shopping mall creation, logistics services, ad solutions, price comparison, big data, and security).”
The bottomline: South Korea is uniquely positioned to emerge post-Covid as an e-commerce giant, and it is already making moves with IPOs and tangible government initiatives. This is further supported by Korea’s population demographics and culture, which are aligned with the value provided by online shopping.
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