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South Korea: Internet and TV shopping opportunities

Global Opportunities: In South Korea, the online retail market (internet and TV shopping) is forecast to reach KRW 31 trillion (CHF 27 billion) in 2018. According to Korea Statistics, the total trade volume of online retailers for 2014 has surpassed the one of large offline retailers like Emart or Lotte, Hyundai and Shinsegae department stores for the first time.

South Korea: Internet and TV shopping opportunities

South Korea is the most connected place on earth, with approximately 80% of 50 million people online. More than 75% of Koreans own smartphones, enabling quick and convenient online purchases.

The local online retail market is well established. The market leaders are Gmarket, 11street and Auction. There's also an increasing popularity in overseas direct purchases (ODP) via Amazon and eBay. The consumers benefit from lower prices for foreign products on these e-commerce platforms.

While shoppers’ familiarity with U.S. brands is high, language is a significant conversion barrier, as Koreans prefer to shop in their local language.

  BASIC FACTS

  Region: South Korea
  Industry: Online retail market
  Time: -
  Project volume: -

On the other hand, the awareness of Swiss brands is still limited on classic products like watches and chocolate. Switzerland is well known as a popular travel destination and for high quality, but lacks a significant representation of its competitive consumer products in Korea. Thus, there is an opportunity to place Swiss consumer products in online markets and TV shopping channels in particular. To get started companies may want to work with local agents.

TV shopping market overview for Korea:

Home Shopping Channel

Sales Volume in 2014

Market Share %

GS Home Shopping

KRW 3.7 trillion / CHF 3.0 billion

22.8%

CJ O Shopping

KRW 3.2 trillion / CHF 2.8 billion

21.3%

Hyundai Home Shopping

KRW 2.9 trillion / CHF 2.5 billion

19.4%

Lotte Home Shopping

KRW 2.8 trillion / CHF 2.5 billion

18.9%

Home & Shopping

KRW 1.4 trillion / CHF 1.2 billion

9.4%

NS Home Shopping

KRW 1.2 trillion / CHF 1.1 billion

8.3%

Swiss brands and products in need of higher awareness get an opportunity to enter an expanding market based on a new uprising retail channel: Smart TV shopping.

Making purchases using remote controls with Smart TVs is regarded as a next-generation shopping platform and known as T-commerce. Due to lack of infrastructure and strict regulations, it's been only this year when TV shopping market leaders announced to begin or increase their efforts in T-commerce. The government will decide to approve one more home shopping channel this year, due to high demand by consumers.

The Korea TV Commerce Association estimated last year's T-commerce market at KRW 79 billion (CHF 69 million). In 2015, it will be tripled to KRW 250 billion (CHF 219 million) and increase again to KRW 700 billion (CHF 612 million) the following year.

The number of Smart TV subscribers in the country broke the 10-million mark last year. Women above mid 30s are the majority target group. In addition, the continuous trend regarding the aging of the population creates a new target group predestined for TV shopping. The keys to success are the convenience of T-commerce including the excellent logistics and parcel delivery service in the country.

Fashion (items), food, cosmetics, electronics and household appliances are currently the main products. Now, TV shopping channels are competing more and more to secure differentiated brands. Luxury goods, travels and even insurances supplement the traditional main product offers.

The push-marketing mechanism of TV shopping allows smaller brands to gain wide recognition in a short period of time. Therefore, this promising retail channel provides an interesting opportunity to enter the Korean market. However, it's important to prepare marketing strategies also on other platforms to maintain long-term sales, particularly in the mobile market. This is by far the fastest growing shopping market in Korea and retailers respond to this trend with “omni-channel” retailing, a shopping ecosystem combining offline, online and mobile services.

According to the Fair Trade Commission (FTC), the TV shopping sales commissions averaged at 34% in 2014. This is 8-10 percentage points higher than in the offline retail market. The FTC will continue disclosing the sales commission rates for suppliers.

Among the rising number of Koreans with an increasing purchasing power, trending markets are outdoor activities (hiking, cycling, camping), health products and luxury brands. Besides scouting for new brands, TV shopping channel providers are also constantly looking for new opportunities to expand and reinforce the existing popular product groups like tableware, fashion items (in particular underwear & socks, outerwear), bedding, apparel & accessories and cookware.

The home shopping channels are  of particular interest for Swiss high-end consumer goods. They may include specialty food products, food supplements, cosmetics (skin care or dermatological) or all kind of outdoor articles (clothing, leisure, camping, etc.). Korean consumers highly respect Switzerland and its products, therefore particular importance should be given to the “Swissness” of the articles (either “Made in Switzerland” or “designed in Switzerland”).

Should you choose to further evaluate the Korean market we suggest getting in touch with the S-GE consultant responsible for South Korea who can advise how to best approach this B2C market.

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