South Korea’s retail landscape is experiencing a seismic shift as Chinese e-commerce giants, armed with aggressive pricing strategies and ample capital, rapidly expand their presence, posing a formidable challenge to local competitors. The growing dominance of platforms like AliExpress, Temu, and Shein is reshaping consumer behavior and prompting calls for regulatory interventions to level the playing field.
Chinese companies have surged in Korea’s e-commerce market, leveraging their significant financial resources to undercut local rivals on price. One of the key players, AliExpress, has emerged as the nation’s second-most visited e-commerce platform, boasting a staggering 114 percent year-on-year increase in monthly active users (MAU) to 8.87 million as of March. Temu, another Chinese platform, witnessed exponential growth with its MAU soaring to 8.29 million—an astronomical 1,508 percent rise since its introduction to the Korean market last August.
In contrast, Korea’s leading e-commerce platform, Coupang, experienced a more modest 5 percent increase in MAU, reaching 30.86 million in March. This disparity underscores the rapid ascent of Chinese players, fueled by their aggressive pricing strategies that resonate with cost-conscious Korean consumers.
For instance, the price discrepancy between AliExpress and local platforms is stark. A popular item like Maxim Mocha Gold instant coffee is significantly cheaper on AliExpress, priced at $30.51 (approximately 41,000 won) for 360 packs, compared to 47,200 won on Coupang. This price differential exemplifies the challenge faced by Korean retailers striving to maintain competitiveness in the face of cutthroat pricing from Chinese counterparts.
Furthermore, the competitive advantage of Chinese e-commerce firms is amplified by comparatively lax regulatory environments in Korea. Looser regulations enable Chinese platforms to expand their operations swiftly, evading certain constraints faced by local companies. Consequently, Korean e-commerce players are urging the government to implement countermeasures to ensure fair competition and protect the domestic retail ecosystem.
The disruption caused by Chinese e-commerce expansion extends beyond pricing dynamics. The influx of Chinese e-commerce giants into Korea’s retail sector is making the local industry suffer due to aggressive pricing and regulatory advantages. It is important for Korean regulators to stop this otherwise the industry will have to depend on imports to sustain its growth. Such a step was taken by India few years back and its local economy is growing now.
