Conglomerates barging into social commerce

By Yoon Ja-young

Retail conglomerates are expanding to social commerce businesses with a positive outlook of the market. It is, however, to be seen whether they will pose a threat to the venture players currently dominating the market.

Shinsegae Mall, the e-commerce arm of Shinsegae Department Store, launched Happy Buyrus Season 2, Monday, upgrading its social commerce service Happy Buyrus. It bolstered competitiveness in terms of shopping items, offering five times more items than in the season 1. Some of the brands sold at Shinsegae Department Store are also sold at a discount of 30 to 70 percent.

O’clock, a social commerce service of CJ O Shopping, is expanding its market share by launching around 100 products and services every morning. It rose to rank the fifth player in the market in terms of visitors and clicks.

It isn’t, however, their first entry in the social commerce market. Major retail conglomerates launched social commerce services in 2010 when the industry was in the initial stage. Their influence, however, was minimal, and they almost abandoned or sold the business.

Currently, the social commerce industry is led by three or four major players, Coupang, Ticket Monster, Groupon Korea and Wemakeprice, which were launched by young entrepreneurs.

Despite huge capital and human resources, it is doubtful whether the conglomerates will accomplish much in social commerce enterprises.

“Don’t forget that we have made huge investments in the business. During the past year and half, we filled the business with the passion of a venture firm, and grew on huge capital. It was a ‘do or die’ game for us,” said a spokesman for Ticket Monster.

Local conglomerates, meanwhile, don’t venture. They would rather buy a promising company or buy their technology instead of coming up with their own ideas.

“We are expanding from a simple sales platform to a total business solution for small merchants and manufacturers. Conglomerates won’t move unless they expect big profit here,” he said.

The leading social commerce service in the country had huge funding from venture investors, but it is doubtful whether conglomerates will pour in that much money into the market. Even if they do, it may be too late. “The market already has an entry barrier.”

A spokesperson for another social commerce company said that they are in a more advantageous position than conglomerates in this market. “Each of the major social commerce businesses has over 700 employees, all concentrating on social commerce. Conglomerates, meanwhile, have only a small number of people working on it. It’s no competition for us in terms of concentration or know-how,” she said.

As social commerce is developing, the major players have been adapting in a flexible manner, but conglomerates have chosen to apply their old retail business models. Both CJ and Ticket Monster launched an online business dedicated to shoes, but only Ticket Monster has achieved steep growth thanks to quick localization of the business model.

Despite initial failures, conglomerates have returned to the market as they can’t give up the booming market. Social commerce services grew to become a roughly 800 billion won market last year, from a mere 50 billion won in 2010.

The retail market is also increasingly turning mobile, with social commerce forming one pillar of it. Retail giants can’t ignore the trend.

Some retail giants, running home shopping channels, have also witnessed social commerce eating into their pie. “Home shopping had a competitive edge over open markets in that they could massively promote certain products or services within a short period of time. That’s exactly the same as what social commerce offers,” an industry analyst said. He pointed out that manufacturers and services are increasingly taking social commerce as an alternative sales channel as home shopping levies too much commission.