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By Kim Jae-heun
The digitization of retail here has been pushing more and more people to shop online.
Previously, people were uncomfortable with internet shopping because they were not used to paying for the product first and receiving the order a week after. Sometimes, products never arrived.
People also didn't like the fact that they had to choose the right size or desired color for the item only by looking at the images online.
But many of the unfavorable conditions have been improved and online shopping now gives many more benefits than shopping at a department store or supermarket.
Online retailers have price competitiveness for products over brick-and-mortar stores as they do not have to pay rent.
The advancement of logistics here also made delivery service faster, convincing customers to shop online.
Coupang, in particular, became the top e-commerce firm here with its overnight Rocket Delivery service. This was possible because it owns the most distribution centers in the country including one in Daegu that is equivalent to the size of 46 soccer stadiums.
The COVID-19 pandemic also played a pivotal role in accelerating the digitization process.
Strict social distancing rules adopted by the government have urged people stay quarantined at home and use delivery service.
This helped food manufacturers and online retailers to flourish in a short period of time.
Resurgence of retail giants
Local retail giants like Shinsegae and Lotte Shopping knew they had to prepare for the new trend to come but they were too complacent.
The consequences were harsh. Shinsegae affiliate E-mart, the country's largest retailer, recorded its first-ever operating deficit in 26 years. With the appearance of e-commerce firms like Coupang in 2010 and eBay in 2011, retail giants' sales have been falling steadily.
Lotte Shopping, which owns the most department stores and supermarkets in the country, declared in February that it would shut down 200 of its brick-and-mortar outlets, which is nearly 30 percent of the 700 it operates nationwide.
E-mart instantly began to invest huge amounts in its online mall SSG.com to compete with Coupang and Market Kurly, and Lotte Shopping followed suit.
E-mart launched SSG.com in 2018 and Lotte introduce its combined-online-shopping platform Lotte ON in May. Entering the online market two years late, it was crucial for Lotte to catch up with other competitors in the market. SSG.com has successfully brought loyal customers from E-mart, while Lotte lost its customers to other competitors in the period.
However, their establishment in the market and the strong brand power of their mother companies cannot be overlooked.
Coupang is running a risk with its snowballing deficit recording 3 trillion won ($2.46 billion), while E-mart and Lotte Shopping are managing their operations stably with no big losses.
Live commerce: next big thing
There is no dominant power in the online retail industry now.
Internet giants Naver and Kakao started their own e-commerce businesses recently and they have become big threats already.
Naver has already surpassed Coupang to rank No.1 in terms of gross merchandise value.
Now, many players are pointing to live commerce as the key to success in future retailing.
Live commerce combines real-time video streaming and two-way communication service for online customers to see the products and ask questions about them before they make purchases.
EBest Investment & Securities predicts the trade volume in the live commerce sector to skyrocket from 3 trillion won this year to 8 trillion won in 2023.
Naver has launched its live commerce platform in March, and Kakao followed suit this month. Coupang is also preparing to launch its own service soon.
Naver CEO Han Seong-sook said during a conference call that the company will strengthen its live commerce service by making it easy for customers to spot on the main page of its Naver portal.
Naver will also provide IT tools for sellers to create their own live content and take 3 percent of sales as a commission fee.
The IT firm says it is very cheap compared to the commission fees home shopping companies charge.
Local home shopping giants like Hyundai, Lotte and CJ O Shopping will also run live commerce services on Naver, utilizing the massive number of registered members on the platform.
Kakao also owns an advantage as a leading platform operator, with 50 million users visiting its platform every day.
In May, Kakao ran a tutorial service and its 43 live commerce content received an accumulated 8.8 million hits online.
In collaboration with Samsung Electronics, Kakao sold about 1,500 sets of earphones worth 300 million won in only 50 minutes.
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