Armed with ultra-cheap products and aggressive marketing tactics, Chinese online retailers such as Ali Express and Temu are rapidly expanding business in South Korea.
More Koreans are making direct purchases from international e-commerce platforms, with global direct purchase spending almost tripling over the past four years, according to government data. Chinese low-cost retailers have emerged as popular shopping destinations for many budget-conscious Korean consumers.
Temu, a global online retailer owned by Chinese e-commerce group Pinduoduo, is the most popular app in the free app category in Korea as of Nov. 7. Since its launch in August last year, Temu has been growing quickly across countries such as France, Germany, the U.K., Australia, Japan, and Korea.
Temu’s slogan “Shop like a billionaire” reflects its focus on selling ultra-cheap goods to overseas consumers.
Temu made its foray into Korea in July with aggressive marketing tactics, including discounts of up to 90 percent, rewards of up to hundreds of thousands of won, and free one-time returns. This is a part of the retailer’s strategy to gain a foothold in the overseas direct purchase market in Korea, which is currently dominated by Chinese rival AliExpress.
Through Temu’s refer-a-friend program, both existing and new subscribers can participate in daily reward events with a high winning rate.
“I was initially skeptical of the offers but was pleasantly surprised by the deliveries, which was actually good,” said a 30-year-old shopper who uses Temu. “If you exchange referral links with your friends and increase the number of referrals, you can participate in daily earning events such as roulette, and the winnings will continue to accumulate in your account,” she added.
Korean consumers turn to low-cost Chinese online retailers
Chinese low-cost retailer AliExpress has experienced significant growth in recent years. AliExpress had over 5 million monthly users on its app as of August this year, ranking fourth among shopping apps, just behind Coupang, 11st, and G-market, according to data analytics company WiseApp.
In March this year, the retailer invested 100 billion won in the Korean market to expand its logistics and infrastructure. Chinese companies have been showing a keen interest in the Korean market due to its proximity and competitive pricing.
China has solidified its position as the top country in Korea’s direct purchase market, as apps like AliExpress and Temu gained popularity among budget-conscious consumers.
In the first half of 2023, global direct purchase spending reached 3.16 trillion won, with 44 percent coming from China, according to Statistics Korea. This is more than double the amount from the first half of 2022.
Analysts say the popularity of these apps has been accelerated by lackluster growth in Korea, characterized by inflation and higher interest rates.
Chinese apps like AliExpress and Temu offer an extensive range of ultra-cheap everyday items, ranging from household items to clothing and electronics.
Domestic retailers are also keen to expand their influence, but Chinese online shopping platforms are already making inroads into overseas markets such as the United States.
In March, Temu became the most downloaded shopping app in the US, surpassing Amazon and Walmart. Shein, a low-cost fast fashion retailer, is also gaining popularity among American teenagers for its 5-dollar skirts and 9-dollar jeans.
Counterfeit and quality concerns rising
Some experts have expressed concern over Chinese low-cost retailers dominating Korea’s cheap everyday goods market.
However, the issue of counterfeits, low-quality products, and slow delivery continue to be major obstacles for the retailers.
The Korean National Assembly recently criticized AliExpress for selling counterfeits made in China. Lawmakers from both ruling and opposition parties cited cases of fake Korean products and called for practical measures.
“We are aware of this problem,” said AliExpress CEO Ray Zhang. He explained that AliExpress has a clear system to eliminate counterfeits, including a screening process for sellers, AI-based identification, and punishing sellers who violate intellectual property rights.
“AliExpress and Temu offer toothbrushes that cost less than 50 cents - domestic retailers don’t stand a chance,” said an industry insider. “Chinese low-cost retailers may eventually dominate the everyday goods market, but it will be difficult for them to expand their influence beyond that because many consumers remain skeptical of the quality and authenticity of China-made products.”
This article was originally published on Nov. 7, 2023.
