Consumers getting smarter

A consumer browses on goods at overseas online store. A rising number of Koreans purchase goods at overseas online sites.
/ Korea Times photo by Bahk Eun-ji

Direct overseas purchasing becomes new trend

By Bahk Eun-ji

Lee Mi-ri, a 30-something working mother with a four-year-old son, searched several online stores for a car seat. She wanted one from a popular foreign brand, but it was much too expensive.

One of her coworkers suggested that she buy it through an overseas Internet shopping mall. Her colleague said it would be far cheaper than through a domestic online mall, where consumers have to pay more for imported goods owing to surtaxes and distribution costs. After searching zealously, Lee finally found a suitable car seat on a U.S. shopping website. "Even though it took almost three days to research, I know I chose one of quality that fits my budget," Lee said.

Koreans have only recently started snapping up goods through overseas websites, but the study released by Incheon Airport Customs (IAC) this month showed an increasing number doing so. According to research by IAC, goods delivered by airfreight increased by 42 percent to around 7.2 million in 2012 from 5 million in 2011. U.S. online stores were the most popular with 6 million transactions, and Germany took second place with 330,000.

"Overseas online shopping has soared mainly because the customs procedures have become simpler, and the prices are cheaper than those that substantially increased after the Korea-US FTA," IAC Director Kim Do-yul said. Typical overseas purchases usually go through domestic shipping agencies. The most popular player is Malltail, which established a U.S. branch to serve Korean customers. Foreign online shopping malls do not usually offer delivery services outside of their home countries, so companies like Malltail provide the address of the branch to both Korean customers and the shopping malls. Once the online store sends the goods to the branch, the shipping agency sends the information again to the Korean customers.

Employees sort out parcels at Jayang Mail Center in Gwangjin-gu, eastern Seoul last week. According to Korea Integrated Logistics Association, the quantity of parcels transported rose 8 percent to 14 billion last year.
/ Yonhap

"More than 20,000 members newly subscribed to the company last November alone, and the number of transactions through our website also topped 900,000 in 2012, up from 570,000 in 2011," said Yoo Sung-ho, promotion department manager of Malltail.

Yoo said the rapid growth of overseas online purchasing is due to the widespread adoption of the Internet and IT devices such as smartphones and tablet PCs, combined with the growing English language ability of Koreans. "The trend shows consumers are getting smarter," the manager said.

New trend in 2013

Since Malltail has gained popularity, several competitors have too. In particular are eHanEx, of the Hanjin Group, which manages Korean Air, and PostBay, a delivery agency dealing only with U.S. shopping malls.

A report released by Lotte Economic Research Institute projected that online purchasing through overseas websites would be a prevalent retail industry trend this year. According to the report, consumers select this option because they have to pay more through domestic importers. In addition, they complain that domestic shopping malls do not provide a wide range of choices of products. Product costs also contribute to the increase. "I can get some goods such as diapers and other baby products at almost a 70 percent discount, especially from U.S. websites," Lee said.

Korean consumers even influence global retail. Gymboree, a popular American children's apparel corporation once blocked Korean access to its websites, but it didn't take long for fierce competition to convince them to open their market. New business models are created with the trend as well. For example, Creget, a Korean website, allows consumers to compare Korean prices with those of foreign online companies.

"It is the nation's first website that offers price comparisons to online retailers in the U.S. and Europe," Creget CEO Choi Se-yoeng said.

In her recent report, researcher Kim Na-kyung at LG Economic Research Institute explained why Koreans are fond of purchasing through foreign websites.

"The lifestyle of Koreans is closely related to the Internet, so they have no difficulty in dealing with it. Lingering economic recession also encourages them to make a practical choice," the researcher said.

Disputes on the rise

Increased spending on overseas online shopping, however, can also create trouble for consumers. For one, delivery takes usually two weeks or more, during which products are sometimes lost. Because at least two companies are involved in each transaction, it is difficult to determine who is responsible for such incidents.

The large number of such incidents has been documented. The Korea Consumer Agency (KCA) said the number of consumer disputes in international electronic commerce increased from 66 in 2010 to 246 in 2012.

One example is related by Yoon Yong-ro, 38, an office worker from Gyeonggi Province. After having bought a Christmas tree and ornaments on an American website last Christmas, he realized that he was exposed to potential credit card theft. "I got a payment authorization text message of 300 dollars that I didn't make," Yoon said. "I reported it to the credit card company, and they said it would take several weeks to resolve."

Unlike domestic transactions, it takes a couple of months to settle consumer disputes. "Statements and bills have to be confirmed one at a time from an international card company like Visa and MasterCard, as well as from national companies. It takes time," said an unnamed employee of a national credit card company.

According to the credit card company's manual, international card companies are obliged to respond to customers' inquiries within 30 days, during which billing will be postponed.

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