One in five South Koreans use Chinese online shopping apps AliExpress and Temu, according to data analysis firm Mobile Index on Feb. 19.
South Korea’s leading tech giants, Naver and Kakao, are expected to benefit from the rise of Chinese low-cost retailers in advertising and marketing. But experts are concerned that Korean retailers may soon face intense competition in the long term as more budget-conscious consumers turn to Chinese retailers for shopping.
AliExpress’ monthly active users jumped from 2.52 million in January 2023 to 5.6 million last month. Temu had only 0.33 million monthly active users when it first launched in Korea last August, but this figure rose to 4.6 million last month.
Alibaba’s online shopping site AliExpress expanded into Korea in 2018 but initially failed to gain traction because delivery was slow. The company has since invested in logistics and established a customer center to shorten delivery times. Coupled with aggressive marketing strategies, including TV commercials, AliExpress has managed to attract a broader user base by offering a wide range of low-price products and customer-friendly policies such as free shipping and returns.
Temu, run by Chinese e-commerce group Pinduoduo, became popular in Korea for selling ultra-cheap products. Pinduoduo is swiftly dominating the domestic e-commerce market in China and surpassed Alibaba in terms of market capitalization last November.
Naver and Kakao have both heavily invested in e-commerce and are wary of the influx of Chinese low-cost retailers.
Naver posted record sales and profit last year, driven by growth in online shopping. Revenue from its commerce business, including Naver shopping, surged 41.4% from the previous year to 2.546 trillion won. Kakao’s commerce business, Talk Biz, also reported 2.1 trillion won in revenue, up 11.2% year-on-year.
While Naver and Kakao consider AliExpress and Temu more as advertisers than direct competitors, their growing presence in Korea’s online shopping market suggests otherwise. AliExpress is considering building a logistics center in Korea to offer next-day delivery, a move that could challenge the competitive advantage domestic shopping platforms have over Chinese retailers.
“Currently, AliExpress and Temu mostly sell low-cost products, so they are not in direct competition with Naver and Kakao,” said Jung Yeon-seung, President of the Korea Distribution Association and professor at Dankook University.
“But AliExpress and Temu have more than 10 million domestic users, and their product categories are expanding as both companies increase investment in logistics,” he added. “Their market presence may grow stronger in the long run.”
