Chinese Sellers Entering Korea through Coupang Logistics: Countermeasures for Korean Sellers
The Chinese Sellers Riding the Rocket
The invasion of the domestic market by Chinese e-commerce platforms, represented by AliExpress and Temu, is showing a level of disruptive power beyond predictions. Our investigation found that sellers sourcing products from China and selling them domestically, whether through purchasing agents or direct buying, have been negatively impacted in terms of sales.
Against this backdrop, government agencies such as the Korea Customs Service, the Ministry of Trade, Industry and Energy, and the Korea Post have been closely monitoring the spread of Chinese e-commerce platforms, preparing countermeasures to protect domestic industries and address the distribution of counterfeit products. They have reached out to us for information sharing as well.
However, sellers' concerns are not limited to the expansion of Chinese platforms in Korea. Korean e-commerce platforms like Coupang and Gmarket are also expanding their product categories by directly introducing Chinese sellers to compete against Chinese e-commerce platforms. Sellers must now be mindful of competition not only from Chinese platforms but also from Chinese sellers within Korean platforms.
In particular, Coupang is not just allowing Chinese sellers to join its platform. It is actively promoting a full-fledged fulfillment service, Coupang Global Fulfilment (CGF), which provides fast international logistics services to Chinese sellers and even manages their inventory in Korean warehouses. This service could overcome the major limitation of Chinese sellers - shipping speed. If Chinese sellers get on board with Coupang's fulfillment service, it means they can match or exceed the shipping speed of domestic Korean sellers. Thus, Korean sellers now face competition not only from AliExpress and Temu but also from Chinese sellers on Coupang's platform. Given that there are no e-commerce logistics services surpassing Coupang in Korea at the moment, the worries of Korean sellers are intensifying.
Why Can't We Use Platforms for Global Expansion?
As the domestic e-commerce market faces a double whammy of growth slowdown and direct penetration by Chinese platforms and sellers, sellers' response paradoxically lies in global exploration. The rising popularity of Korean products, fueled by the Korean Wave, suggests an opportunity for market expansion abroad. Korean e-commerce platforms play a role in this too.
For instance, while Coupang is ironically a gateway for Chinese products, it also serves as a channel for Korean sellers to venture overseas, albeit its global influence is currently limited to Taiwan. Coupang indirectly supports Korean sellers' international expansion by handling logistics, customs, local delivery, and customer service for products sold in Taiwan through its Rocket Delivery service.
Qoo10, merged with TMON, Wemakeprice, and Interpark Commerce, is intensifying its strategy for global expansion, especially after acquiring Wish. A representative from Qxpress, Qoo10's logistics subsidiary, mentioned that Qxpress has completed system integration allowing sellers from Qoo10, TMON, Wemakeprice, and Interpark Commerce to manage products and request logistics services seamlessly across platforms, optimizing for one-click sales to China, Japan, and Southeast Asia.
If Wish is fully integrated into the Qoo10 ecosystem, it could break Qoo10's Asia-centric limitations by tapping into Wish's user base in Europe and North America. Global sellers interviewed by Connectors expect a rapid emergence of services linking Wish's sales network with Qxpress's global logistics.
Shopee, Southeast Asia's largest e-commerce platform, has been actively recruiting Korean sellers for a while. According to a survey conducted by Shopee Korea last month, 59% of responding sellers were resellers sourcing and redistributing products, while 41% were brand companies. Moreover, 36.1% of the sellers focus exclusively on overseas sales. Shopee emphasizes that intermediary resellers can still be influential abroad and that focusing solely on foreign markets is a viable strategy.
The movement of 'Let's go overseas together now that the Korean market is challenging' is not new, but the increase in consultations and logistics service inquiries correlates with the recent expansion of Chinese e-commerce platforms. Most consultants are manufacturers and brand companies, with middleman resellers being relatively rare, according to e-commerce platform representatives. The reasons behind this trend were explored through inquiries with sellers.
Can Resellers Compete?
The majority of sellers on domestic e-commerce platforms like Naver Smart Store, Coupang, 11th Street, and Gmarket are resellers. They typically source products from Chinese platforms and domestic wholesale malls, starting with no-inventory purchasing and consignment selling, and evolving to wholesale purchasing and branded selling as they grow.
To break down the process, purchasing agents list products from Chinese platforms like AliExpress, Taobao, and 1688 on domestic platforms. When a sale occurs, the seller purchases the product directly from the Chinese platform and inputs the domestic customer's address for shipping. If the sourcing platform does not offer shipping to Korea, they might use a forwarding service. In any case, purchasing agents can sell online without holding any inventory.
A similar model is consignment selling, where resellers source products from domestic manufacturers or farms unfamiliar with online sales. The reseller lists these products on e-commerce platforms, and upon a sale, the supplier handles the logistics to the consumer. This model is akin to dropshipping.
Next is wholesale purchasing, where the seller buys a certain quantity of products from domestic or international suppliers to sell. This comes with a minimum purchase requirement and inventory management, but potentially higher margins. Adding branding allows the seller to differentiate by altering labels, packaging, and product composition. Typically, commerce sellers start with purchasing and consignment selling, gradually evolving to wholesale and brand sellers, with commerce becoming their main business at the brand seller stage.
Three Barriers Faced When Going Global
Those who typically find global expansion challenging are the purchasing agents and consignment resellers, especially those relying heavily on Chinese platforms. These resellers may face the same or even more intense challenges abroad as they do in Korea, where Chinese platforms and sellers are directly entering the market.
① Chinese Sellers Are Everywhere
The first reason is that global markets are already dominated by Chinese platforms and sellers. Chinese sellers have expanded into major markets like North America and Europe before Korea. For instance, Chinese sellers, including those from Hong Kong, make up 63% of the top 2000 sellers on Amazon.
Southeast Asia, closer to China, is virtually a battleground for Chinese capital. The largest shareholder of Shopee, the biggest e-commerce platform in Southeast Asia, is China's Tencent, and the second-largest platform, Lazada, is operated by Alibaba Group.
Many Chinese sellers have already entered the Southeast Asian market. According to Qoo10 sellers interviewed by Connectors, a common strategy among Southeast Asian sellers is to copy popular Korean products and produce them cheaply in China. Competing with such resellers, who merely resell Chinese products, is extremely difficult.
② D2C Has Become the Spirit of the Times
Although North American and Southeast Asian consumers, well-acquainted with the Korean Wave, prefer genuine Korean products over rebranded Chinese ones, there's a growing ability to discern authentic Korean products. Global sellers are sourcing domestically strong products like agricultural goods, food, hygiene items, and cosmetics for export.
However, the challenge lies in complex global logistics. The time and cost involved in product registration, certification, customs, and logistics for exporting domestic products are significant. Even if sellers manage to enter platforms, there's a risk of being bypassed as platforms may contact manufacturers directly.
Global e-commerce platforms, including Amazon, favor D2C (Direct to Customer), encouraging direct entry and brand store establishment by brands and manufacturers over resellers. It's common for distributors and manufacturers to create private label products, leaving small sellers with little influence over suppliers and brands. This trend is not just international but has been happening domestically.
③ The Dilemma of Fulfillment
Cross-border e-commerce sellers report a gradual decrease in local seller-originated fulfillment volumes. From Amazon to Shopee, Lazada, and Qxpress, there's a general reduction in fulfillment service usage, influenced significantly by Chinese platforms like AliExpress, Temu, and Shein. As consumers flock to these platforms, sales drop, inventory turnover in local fulfillment centers decreases, leading to a vicious cycle of increased storage costs, service quality degradation, and further sales decline.
Turning Crisis into Opportunity: What's Needed
So, is there really no chance for domestic resellers to expand globally? It may sound cliché, but the fundamental approach is unavoidable. In the short term, there needs to be an emphasis on 'curation' to build trust among the multitude of products from Chinese platforms. Furthermore, sellers need to develop their own branded products.
Recently, among global sellers, there's a growing consensus that merely scraping and selling a large quantity of products from Chinese platforms without holding inventory is no longer competitive. Instead, there's a trend of directly sourcing high-quality, lesser-known products from within China or domestic products, and then branding and selling them. This strategy is gaining traction in online seller courses and closed seller communities based on memberships.
For sellers who have already established a brand or are producing and selling their own products, where do they find potential? They emphasize that, beyond getting listed on well-known platforms, it's crucial to have logistical competitiveness to excel in pricing and delivery.
However, there are limitations. To establish a competitively priced logistics service, a substantial volume of shipments is needed. If sales in foreign markets are minimal, sellers' bargaining power for logistics rates will naturally be lower. It's a chicken-and-egg problem, but finding a way to use competitively priced logistics services from the start seems challenging.
Sellers need two strategies to gain initial competitiveness in logistics: use logistics companies that already have scale and can offer services at reasonable rates, or leverage platform companies with similar capabilities. Paradoxically, sellers are expressing the need for platforms like Coupang or Qoo10, which have established cross-border logistics networks.
It's hard to say that Coupang, Qoo10, or another Korean platform like Naver has effectively built the capacity to facilitate domestic sellers' smooth entry into foreign markets. Instead, services from global e-commerce platforms like Amazon or Shopee have been considered the only methods for international expansion.
Therefore, domestic sellers aiming for overseas markets are diligently researching operators with logistics hubs in their target countries. They're trying to maximize their logistics competitiveness by pooling their logistics with those companies' logistics centers, sea containers, and last-mile delivery partners.
At the same time, they're exploring whether there are better global distribution and logistics companies available. Sellers undergoing these challenges hope that Korea's e-commerce platforms can create new alternatives for international expansion. If a platform that can perform this role well emerges, it could not only defend against the expansion of Chinese platforms in Korea but also prove to be an opportunity for mutual growth with sellers. We will continue to share the struggles and efforts of these sellers.
Contact us and we'll help you learn more and connect your business. cs@beyondx.ai
신승윤
