Korea takes steps to curb rapid expansion of Chinese e-commerce firms

Models walk down a runway wearing clothes and shoes available on Chinese online shopping mall AliExpress at the COEX convention center in Seoul, March 9, 2023. Yonhap

The government is set to take action against Chinese e-commerce platform operators such as AliExpress, Temu and Shein, which have been rapidly expanding their shares of the e-commerce market here by offering ultra-low prices, according to the industry ministry, Wednesday.

The Ministry of Trade, Industry and Energy said it held a closed roundtable discussion with domestic online retailers in Seoul to assess the impact of Chinese online retail companies' entry into the domestic e-commerce market.

Domestic online retailers that attended the meeting included Coupang, 11st, Gmarket and SSG.com. Officials from those companies offered their assessments of the current market situation to officials from the industry ministry.

“The meeting, held privately, was aimed at learning what kinds of difficulties domestic e-commerce platform operators are currently experiencing," a ministry official said.

However, the official clarified that this was not a meeting to discuss measures to prevent business activities by operators from a specific country.

"We understand that Chinese companies are taking advantage of low prices. However, this meeting is not to come up with regulatory measures to limit or restrict the businesses these companies are doing," the official added.

Chinese e-commerce platform operators have been rapidly undermining the domestic online retail market by providing ultra-low-priced products and offering significant discount benefits.

Consumers who choose Chinese platforms such as AliExpress and Taobao often buy goods that are not greatly affected by long delivery times. Consequently, small business owners who purchase wholesale industrial items from China and sell them domestically are significantly impacted, as opposed to those selling food products.

"I was trying to buy wireless earbuds on Coupang and it was 18,000 won ($13.5). But the same product was 11,000 won on AliExpress. Although the delivery time is long, I bought the product on the Chinese e-commerce platform because I could buy it for a cheaper price," a customer surnamed Chung said.

The number of customers like Chung who are choosing to shop on Chinese platforms is rapidly increasing in Korea. As of November 2023, the number of AliExpress app users in Korea surged to 7.07 million, more than double the 3.43 million a year earlier, according to data by Wiseapp Retail Goods.

According to the 2023 Online Shopping Trends released by Statistics Korea, the amount of direct online purchases from China last year increased 121.2 percent compared to 2022, reaching 3.29 trillion won ($2.46 billion).

Kim Dae-jong, a professor of business administration at Sejong University, said that the way Chinese companies are eroding the Korean market threatens the survival of domestic retail companies and small business owners selling goods on these e-commerce platforms, and therefore countermeasures are needed.

"Products from Chinese companies are being imported without tariffs and are threatening domestic companies by circulating in the domestic market. As Korea has the highest smartphone penetration rate in the world, the e-commerce market is highly developed. Safety measures are needed to ensure fair competition between Chinese and Korean companies," the professor said.