CU in China: Why South Korean retail giant is adopting 'online first' strategy
A CU convenience store in Seoul / Courtesy of BGF Retail
South Korean convenience store giant CU has been testing the waters in China with a limited online trial operation, marking a different approach from other multinational brands that bet big on physical outlets.
The brand, operated by BGF Retail which has around 18,600 stores in South Korea, is being cautious to start with. Together with its Chinese partner Ningshing Ubay, it is only selling 11 products on e-commerce platform Tmall under Alibaba Group, which also owns the South China Morning Post.
Analysts said the "online-first, private-label-driven" business model was meant to avoid head-on confrontation with rivals in China's highly competitive e-commerce market but also guarantee access to the world's second-largest consumer market.
"If consumers maintain interest, a deeper strategy can follow," said Chen Bo, a marketing professor at Sungkyunkwan University in Seoul. If not, the approach can easily shift as selling products online first is a lower-risk way to test demand, he added.
German supermarket chain Aldi tested the Chinese market in a similar way in 2017 through an online store with 500 to 600 own-brand products. Two years later, the firm opened its first physical store in Shanghai.
In May, American brand Costco generated interest among Chinese consumers when its logo appeared on the website of Chinese e-commerce giant JD.com. Unlike CU and Aldi, which tested demand online before opening stores, Costco had already built seven physical warehouses since 2019. The JD.com tie-up just expanded its reach to those who could not visit stores in person.
Korean retailers such as E-Mart and Lotte Mart had entered the Chinese market much earlier but withdrew in 2017-2018 after facing boycotts amid Beijing's anger over Seoul's deployment of the US THAAD missile system.
However, China is still a market too large to ignore for most foreign brands, despite concerns over slowing consumer demand.
Chinese government data shows that the country has a middle-class population of 400 million, and business intensity - as measured by the number of people per convenience store - is still lower than developed markets.
Even though China's convenience store market is crowded with Chinese rivals and foreign peers like 7-Eleven, it remains far less saturated than other markets. According to KPMG, the country had just one store for every 4,441 people, compared with one per 1,077 in South Korea and one per 2,197 in Japan.
Although a social media posting on CU's RedNote page said "physical stores are under preparation," a CU representative was quoted as saying by Korean media outlet Sisa Journal in June that it "did not constitute an entry into the Chinese market".
A customer shops CU’s private brand food products at a store in Seoul, Wednesday. Courtesy of BGF Retail
Nonetheless, analysts said South Korean companies now had more opportunities in China and could succeed in a niche market given the improving bilateral relations, as well as the growing interest by Chinese in K-pop.
"Convenience stores provide consumers with a platform to experience the Korean lifestyle through food, products and space," Lee Seong-hwa, head of new business at rival GS Retail, said at the 2025 Distribution Forum in Seoul last June.
Yvonne Yan, a 25-year-old who travels to South Korea twice a year for K-pop concerts, buys CU's Greek yogurt on each trip. "It has this cement-like texture you can't find in China," she said in an interview.
Now she is waiting for CU's lemonade highball drink, a collaboration with K-pop girl group Aespa, to launch on Tmall so she won't have to fly to Korea to taste it.
On RedNote, where the hashtag #KoreanConvenienceStores has drawn 270 million views, there are hundreds of similar comments calling for local availability of products tied to memories of Korean travels.
But the K-pop effect has its limits, noted Chen from Sungkyunkwan. "The K-pop filter helps brands gain attention initially, but Chinese consumers will return to the product itself - quality, features, value. Cultural premium alone is not enough," Chen said.
Read the article at SCMP.