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  1. E-commerce platforms originating from China, such as Alibaba Express and Temu, are experiencing rapid growth. In the Korean e-commerce industry, there's speculation that Alibaba Express might have reached the third spot, following Coupang and Naver. Even Temu, which entered the Korean market slightly later than Alibaba Express, has significantly closed the gap in Monthly Active Users (MAU) with Alibaba Express to just 1 million. How is the domestic e-commerce and logistics industry responding to this foreign incursion?
  2. Recently, there has been talk in the logistics industry about Alibaba Express inquiring into detailed conditions for operating a domestic logistics center. Last year, Lei Zhang, the representative of Alibaba Express in Korea, mentioned that operating a domestic logistics center was worth considering. Why would Alibaba Express be interested in operating a logistics center in Korea? We've compiled four benefits Alibaba Express could gain from operating a logistics center in Korea, based on discussions with current e-commerce and logistics industry practitioners.
  3. There is one method to secure all four mentioned benefits at once: Alibaba Express acquiring 11st. While there are considerations regarding valuation, the industry widely accepts that 11st is keen on selling itself. If Alibaba Express becomes the acquirer, the synergy could be greater than expected, according to forecasts in the e-commerce sector.
  4. One might wonder why Temu, which has grown as rapidly as Alibaba Express, has not been heard to be entering the domestic logistics center market. The difference in the e-commerce business operation structure and the merchant onboarding process between Alibaba Express and Temu provides an answer. We've heard from global sellers who have stores on both Alibaba Express and Temu about these differences.

Alibaba's Interest in Korea: Targeting Warehouses?

One of the hottest topics in the Korean e-commerce ecosystem recently revolves around the Chinese cross-border e-commerce platforms Alibaba Express and Temu surpassing 10 million Monthly Active Users (MAU). According to IGAWorks, as of January 2024, Alibaba Express and Temu's MAUs were reported at 5.61 million and 4.59 million, respectively. Continuing from last year, the number of new installations for these platforms remains the highest in the domestic shopping sector, showcasing their steep growth trajectory.

In the e-commerce industry, there's speculation that Alibaba Express has already surpassed 11st and Gmarket to become the third largest commerce app in Korea. Given that Alibaba Express has declared this year as the "first year of localization in Korea," it seems increasingly likely that the position of the third-largest e-commerce platform in the country will inevitably be handed over to a Chinese platform.

Alibaba Express's recent activities in Korea have been notably aggressive. For example, in October last year, they launched K-Venue, a product channel within the app that promises delivery within three days of ordering in Korea. They are sincerely expanding their network of domestic sellers and brand companies by waiving entrance and sales fees for K-Venue. Efforts to hire domestic practitioners for expanding categories, including fresh food, have also been observed.

The news of Alibaba Express's enthusiasm for enlisting Korean brand companies has already been formalized. Meanwhile, there are whispers within the logistics and real estate industries that Alibaba Express is scouting for appropriate logistics center sites in Korea, considering quite detailed aspects including the location and size of the centers. Lei Zhang, the representative of Alibaba Express in Korea, mentioned at a press conference last year that they are considering opening a local logistics center, making it hard to dismiss these rumors as mere speculation.

There are indeed reasons why Alibaba Express might covet operating a logistics center in Korea. Customs officials have noted that areas like Incheon and Pyeongtaek have long been overwhelmed by the volume of Alibaba Express and Temu shipments. Frequent delivery delays have been a concern for Alibaba Express, as mentioned by industry insiders. According to customs officials, without increasing customs stations or Alibaba Express pre-stocking goods at a domestic logistics center, resolving this issue seems distant. The former option is out of Alibaba Express's sole decision-making ambit, hence increasing the likelihood of operating a domestic logistics center.

This content explores the potential impact of Alibaba Express actually operating a domestic logistics center on the competitive landscape of domestic e-commerce. According to gathered reports, Alibaba Express could gain four major benefits from establishing a logistics center in Korea. The acquisition of 11st, currently eagerly seeking a buyer, was mentioned as a method to secure these benefits all at once.

"Since October last year, Alibaba Express has been operating the K-Venue, a domestic seller channel. Especially from February, they have announced a waiver of fees for sellers entering K-Venue. This move signifies a global commerce platform's effort to not only promote products from Chinese factories but also to guarantee sales opportunities for domestic sellers. Moreover, recent news reports have revealed that Alibaba Express is recruiting personnel in Korea for fashion, beauty, and food sectors. This appears to be an initiative to significantly expand the range of products sold domestically beyond the usual manufactured goods from China" - Logistics Manager A at a Global E-commerce Platform