As E-commerce marketplaces, such as Coupang and Market Kurly, continue to grow and dominate the market in South Korea, offline shopping malls are changing their marketing strategies.
Shopping trends in South Korea have changed significantly over the last decade. People are mostly shopping online, rather than going to grocery stores and offline shopping malls. According to Statistics Korea, the rate of online retailers’ sales has increased about 15.4% in 2019 as compared in 2018. The overall sales transaction cost has increased from $8.3 billion to $9.1 billion.
Increase in online retail sales are attributed to its convenience to customers such as cost comparison, dawn delivery and quick paying methods. According to SAP Customer Experience Report, most Korean consumers are accustomed to comparing the price of goods, as buyers tend to put their wanted products in their cart to compare the price at which they could buy the cheapest product among their cart. Then, they later decide whether to buy the product or not depending on the cost.
Market Kurly, which is an online grocery shopping platform, was the first online market in South Korea to introduce ‘dawn delivery.’ Dawn delivery is a system that delivers groceries ordered before 11pm to the customer’s house by early dawn. Dawn delivery has proved to be extremely effective. From ‘2019 Dawn Delivery Related Service Survey’ conducted by Trend Monitor, 74.9% of consumers who have used the dawn delivery are satisfied with the service and 65.3% of them responded that they will use the service again in the near future. Smartphone payment systems, such as Kakao Pay and Naver Pay, also attracted more users by providing convenient and simple steps to purchasing products. A consumer satisfaction survey on smartphone payment conducted online between May 13-19 by Korea Consumer Agency gathered the data of 1,200 people who have used the smartphone payment services. The survey has shown that 37.6% of survey participants selected ‘convenience of sign-up for using the payment service and payment’ as the main factor when using this service.
Due to these changes in shopping trends and development of technology, offline shopping malls are adopting new strategies to survive in the market. Shinsegae, one of the largest merchandising companies in Korea, launched ‘dawn delivery’ service on June 2019 just as Market Kurly, and expanded their online shopping delivery platform. Shinsegae altered some of their logistic centers into a cutting edge online-only logistic center which enhances the efficiency of delivery systems. In addition, they also launched phone applications that combine online shopping and online payment.
Although the offline shopping malls are changing their marketing strategy by adopting online methods, retailers such as E-mart, a subsidiary company of Shinsegae, is showing steady operating losses. E-mart posted $25.3 million operating losses in the second quarter this year, while comparing to the same quarter last year, they had an operating profit of $62.2 million. KB Investment analyst Shinae Park implemented about offline markets, including Shinsegae, still need innovative changes which could catch up online commerce in South Korea by saying “even though Shinsegae is expanding new businesses, such as convenience stores or dawn delivery service, it is still not enough to cover the sluggish sales results on main business.”
Written by Seyong Back | Staff Writer
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