Amazon to acquire 30 percent stake in 11st
SK Group's headquarters in Seoul / Courtesy of SK Group
By Kim Jae-heun
The world's largest e-commerce firm Amazon is setting foot in the Korean market through local player 11st, operated by SK Telecom, by acquiring up to 30 percent of its shares.
The number of shares is expected to vary depending on the valuation of the company, which Amazon plans to take over sequentially.
“We will create synergy with Amazon in various information and communication technology areas including e-commerce, and revitalize the industry as a whole,” an SK Telecom official said. “We plan to grow 11st into a global retailing platform.”
Amazon said 11st shares the same corporate philosophy of “customer obsession” and it hopes to provide a range of benefits and new shopping experience to local customers.
Amazon logo / Korea time file
In October 2019, SK Telecom established a taskforce under its e-commerce subsidiary and held talks with Amazon to discuss a 300 billion won share-swap. However, they failed to find common ground on enterprise value and decided only Amazon will invest in 11st.
Following the deal, customers of 11st will be able to purchase products sold via Amazon channels. Specific details on which items will be available to Korean customers have yet to be revealed.
For 11st, which aims to go public sometime soon, Amazon's backing is an opportunity to increase its company value that was estimated at between 2.5 trillion won and 3 trillion won when the National Pension Service invested 500 billion won in it in June 2018.
SK Telecom has been seeking a breakthrough in the fiercely competing local market led by Naver and Coupang. Despite the global trend that pushed many consumers' shopping habits online, 11st has been unable to secure stable operations, after failing to offer distinguishable services or benefits as others did.
SK Telecom expects the deal with the global leader will help it make a turnaround and change the local e-commerce industry.
Many predicts that Amazon will use 11st as its distribution center in Asia.
Although the domestic online shopping industry is saturated at the moment, people still buy many IT gadgets from the American e-commerce firm. And 11st can use this to its advantage to sell digital equipment exclusively from Amazon.
“It is still not easy to purchase products directly from Amazon and a lot of customers here still have not used it at all. If 11st manages to offer local customers the same services that people enjoy overseas, it has a high chance of becoming successful,” an industry source said.
However, there are opinions that it is too early to tell if this deal will bring a big change.
“It will take at least one or two years for 11st to properly sell Amazon products, as Coupang owns the most distribution centers in the country. Plus, the competition in the local market is so fierce that nobody can guarantee Amazon's success here either,” another source said.