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Korea’s e-commerce market is still dominated by local players

Half of Korea’s 10 unicorns are battling in online retail.

Perhaps best known for K-pop, kimchi, cars, and consumer electronics, South Korea’s modest population of approximately 50 million people is also fostering the rapid growth of an outsized e-commerce industry—and it’s dominated by local players.

Amazon is notable by its absence, and even the powerful family-run conglomerates that dominate most sectors of the local economy aren’t running the show.

Instead, locally bred unicorns and a host of startups are battling it out for a slice of the USD 78 billion to be spent online in 2020. In fact, half of Korea’s 10 unicorns are in online retail in some form.

King of the mountain

Korea’s chaebol (family-run conglomerates like Samsung and LG) have lorded over the offline retail food chain since the 1960s. Mom and pop shops scraped the dregs of the market, but few mid-tier businesses had any significant impact.

However, everything changed in 2010.

The year marked the founding of four companies that would all go on to become unicorns battling for supremacy in a market they created and continue to dominate today. Those companies are Ticket Monster (TMON), Wemakeprice, Woowa Brothers, and Coupang.

The following four years saw over USD 428 million worth of investment being pumped into Korean e-commerce. The market exploded, running on a tech infrastructure that Korea’s telcos had previously set in place.

Coupang and Wemakeprice were originally daily deals businesses similar to Groupon, but both companies’ business models quickly evolved to involve third-party sellers like eBay.

Coupang went on to achieve unicorn status in 2014 and then famously pulled out of a planned initial public offering at the 11th hour. It then reinvented itself a second time as an “open market,” not unlike Amazon’s. In fact, this move earned Coupang the appellation “Amazon of Korea.” The real Amazon, though, is yet to make a dent on the country’s e-commerce market.

With a USD 9 billion valuation, Coupang is now the no. 1 online shopping site in Korea.

Wemakeprice, on the other hand, achieved unicorn status in 2019, while TMON would have also shared the moniker if it hadn’t been acquired in 2011.

Fresh markets

Another Korean unicorn that lost its horn through acquisition is Woowa Brothers, the developer of food delivery app Baedal Minjeok (Baemin). The company became a unicorn in 2018 and was acquired in December 2019 by German food delivery company Delivery Hero for USD 4 billion.

Baemin is Korea’s top food delivery service and is competing with Coupang and others in the last-mile space, offering one-hour delivery on a wide range of convenience items.

“Korea is the most advanced food delivery market in the world, including tech innovations in the space, the number and development of large players, and its rapid market growth,” said Woowa Brothers’ head of investment Jongho Joo in a 2020 e-commerce report.

Through its acquisition, Woowa Brothers has enough capital to ensure that Baemin will remain a tough competitor against Coupang.

Changing preferences

According to Joo, Korea’s e-commerce market is still growing, “so there’s still room for players in the space to expand, including offering new products and services within specific niches.”

While he is pessimistic about the chances of newcomers at this late stage, Koreans’ ever-changing preferences may yet prove him wrong. Indeed, many startups are enjoying rapid growth, thanks to successfully launching niche products and services across the sprawling e-commerce ecosystem. Other companies that have been around for a while have also managed to appeal to younger generations in ways that Coupang and the others have failed to.

The economic power of Korea’s younger generation, for instance, remains a contributing factor to the viability of new entrants to the market. Young families, for example, are frequenting secondhand e-commerce sites in droves to trade in items that their children have outgrown. The freshly prepared food from online grocery service Market Kurly is popular among working mothers as well.

Another e-commerce firm, fashion giant Musinsa, recently gained unicorn status in November 2019. Founded in 2001, Musinsa evolved from an online photo-sharing community for shoe lovers into a street fashion aggregator with its own private label, Musinsa Standard.

Its rivals include Balaan and D.code, two designer fashion e-commerce startups that were founded in 2015 and 2016, respectively.

“The market surely has just begun to bloom. The time seems ripe for vertical platforms to emerge as top leaders of their respective categories,” says Hyung-rok Choi, Balaan’s founder and CEO.

This article first appeared in Tech in Asia.