Naver, Kakao promise not to launch private brands

Naver CEO Han Seong-sook talks about new style of Naver's platform during the press conference held at Grand Intercontinental Hotel in Gangnam, Seoul, in Sept. 2018. / Yonhap

By Kim Jae-heun

The country's two largest platform operators Naver and Kakao said they will not launch private brands and vowed to focus only on their respective platform businesses.

The concern involving the two information technology giants is that they could use their open market platforms to launch and sell their own brand products as Amazon has done.

The American e-commerce firm is suspected of utilizing data it collected from individual sellers on its platform when it launched a private brand online.

Naver, in particular, has an over 57.3 percent share in the search engine market, which helped it to become the No.1 player in the e-commerce market after recording 20.92 trillion won ($17.4 billion) in sales of gross merchandise value.

The portal site operator achieved such results one year after it decided to shake up its Smart Store platform in 2018.

Smart Store lowered the barriers for small traders to open online stores by not charging an entry fee for the platform and instead charging a maximum 3.85 percent sales commission when a customer makes a purchase with a phone payment service. Normally, other platform operators charge over a 10 percent sales commission to sellers.

This more than doubled the number of online store startups on the platform from an average of 15,000 a month in 2018 to 35,000 as of April this year.

Currently, Naver offers various benefits to retail dealers but if it becomes a dominant platform operator in the market, it could decide to start its own brand.

Kakao is a new rising star in e-commerce, recording 3 trillion won in sales of gross merchandise value two years ago with just its gift service which allows users to send gifts to their friends using Kakao Talk.

The internet company still has long way to go to catch up with Naver but its sales and operating profits are rapidly increasing. Last year, Kakao had 75.7 billion won in operating profit from its online business, which exceeded the 61.5 billion won made by eBay Korea. This was possible as Kakao operates the country's most popular instant messaging application that connects 45.15 million users to the e-commerce platform.

Both firms denied any plans to launch private brands competing with existing online shopping malls.

“We will not sell private brand products and will focus solely on our role as a platform operator. Also, we have been sticking to a 2 percent sales commission since we started the open market service in the early 2000s,” a Naver official said.

However, in March, Naver launched an online sneakers trading platform called Kream through its subsidiary Snow, investing 70 billion won in the reseller business.

It came as a surprise to retail dealers as sneakers were previously only traded on internet cafes or blogs between individuals.

“Naver and Kakao will start by only receiving sales commissions first and watch how the businesses go. Then, when they see a lucrative market, they can jump in to open their own brand at any time,” an industry source said.