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| Naver CEO Han Seong-sook, left, and eBay Korea CEO Byun Kwang-yun |
By Park Jae-hyuk
The rapid growth of Naver's e-commerce platform, Naver Shopping, has become a major threat to eBay Korea, which has the largest share in the country's booming e-commerce market, industry analysts said Thursday.
The U.S. e-commerce giant's local subsidiary, which operates Gmarket and Auction, is increasingly concerned about Naver's expanding online shopping business, fearing that Korea's top portal could undermine its business.
But the dilemma is that there isn't much eBay Korea can do, because the company is also dependent on Naver. Many customers come to shop at Gmarket and Auction via Naver after searching for merchandise on the portal.
Naver, which entered the e-commerce industry in 2001 as a price comparison service provider, has been operating its own online marketplace since 2011.
In June 2014, the internet giant opened the Store Farm platform to allow small- and medium-sized merchants to sell their products without paying commissions to Naver, which dealt a blow to eBay and other e-commerce sites.
"Naver provides price comparison services and runs its own online marketplace where customers can use its payment system, Naver Pay," an eBay Korea spokeswoman said. "For now, it is the biggest threat not only to us, but also to other e-commerce firms."
She said her firm has come up with several countermeasures over the past few years, such as introducing its Smile Delivery and Smile Pay systems, to bolster brand loyalty among its customers.
However, its efforts appear not enough to have customers stop using Naver to access eBay Korea's online shopping malls.
The number of Naver Shopping users has been increasing, while those of Gmarket and Auction have declined significantly.
According to a survey of 1,000 adults conducted by Open Survey, a domestic market research firm, 155 respondents said they mainly used Naver Shopping's smartphone app in the second half of 2017, up from 86 six months ago.
In contrast, the number of respondents who mostly use Gmarket's app declined to 222 from 283 during the same period, while that of Auction app users dropped to 137 from 152.
In addition, Naver has allegedly been prioritizing merchandise that can be purchased with Naver Pay and thus items sold on Gmarket and Auction, both of which do not allow users to pay with Naver Pay, have been placed low on the list shown on Naver Shopping.
For example, when customers type "sneakers" in the search engine, they can see eight types of sneakers on the first page, and five among them can be paid for with Naver Pay.
An eBay Korea spokesman said his company cannot complain about this, because it has no access to Naver's own searching algorithm. However, he added many e-commerce firms are aware of the site's alleged biased practices.
But Naver denies the allegation, saying the display of merchandise follows its own algorithm so it does not manipulate search results.
"The algorithm decides the order of items with an analysis on their popularity and price," a Naver official said. "It does not factor in the use of Naver Pay in deciding the order of merchandise."
The company has been denying that it operates an online retailer because if so it could be subject to stricter regulations.
According to the Korea Institute for Industrial Economics & Trade, the volume of transactions on Naver Shopping in 2017 was estimated at 4.6 trillion won ($4.1 billion).
A research team led by Prof. Yoo Byung-joon at Seoul National University's College of Business Administration even put the figure at 7 trillion won.
Those of eBay Korea and 11st are estimated at 13.7 trillion won and 9 trillion won, respectively. Analysts expect transactions on Naver Shopping will surpass 9 trillion won this year, saying the sales of eBay Korea and others will likely stagnate or decrease.
"Naver will continue to strengthen its online shopping platform because it is a lucrative and fast-growing business," Hana Financial Investment analyst Hwang Seung-taek said. "The portal wants people to stay on its domain and shop with Naver Pay."
Analysts expect other e-commerce sites will have a harder time competing with Naver Shopping, because it will not just offer search results and let shoppers move on to and shop at other e-commerce sites.
