Chinese online shopping platforms are substantially impacting the domestic market with surprisingly ultra-cheap goods. Koreans are already familiar with AliExpress as a platform to choose to sacrifice delivery time over low-cost price. However, almost seemingly out of nowhere, Temu has emerged into the scene. Temu gained popularity with its fast and convenient product delivery service and budget-friendly price. As Temu grew rapidly, AliExpress invested 74.7 million USD in logistics and marketing to expedite delivery within Korea, just like Temu. Along with their intriguing advertisements, C-commerce – a fusion of China and e-commerce – is gaining dominance worldwide.
There is a reason why these new Chinese shopping sites seemingly sprang up unexpectedly and are reshaping the retail experience and our approach to shopping. Temu has put forward a bold policy, burning millions of dollars to deliver the public cheap goods. According to WIRED Magazine, Temu bears about 30 USD loss for every order on average. C-commerce is also keeping the price low, for now, to break into and dominate Korean markets, ultimately to leverage economies of scale. Nevertheless, it is not a simple accomplishment to make a business model that sells goods worth 10 USD for only 1 or 2 USD, alongside an excellent delivery service. Platforms such as Temu and AliExpress that lead the C-commerce had their unique strategy to make it achievable.
According to The Chosun Daily, the first key strategy is optimizing logistics through localization of the supply in Korea. Through onboarding local vendors and direct delivery services within Korea, the platform has expanded its range of products that can be supplied within Korea, resulting in shortened delivery time. C-commerce established such a system by conducting a zero-commission policy for Korean sellers. The zero-commission policy significantly differs from the typical discount on fees Korean e-commerce companies generally offer.
The second strategy is the localization of logistics warehouses. C-commerce has initiated a free return service since November 2023. They opened a returns center at Incheon International Airport to handle returns and refunds within Korea. By altering the previous system that required returning products to China, C-commerce has streamlined the processing in Korea, significantly reducing the return and refund periods. Furthermore, C-commerce plans to enhance logistic capabilities in Korea by implementing an instant delivery service, enabling competition with domestic e-commerce companies in the next-day delivery race.
Lastly, there is the localization of after-sales service. Common grievances included difficulties in connecting with customer service and challenges in Korean language communication during chat consultations. To address consumer complaints related to language issues, C-commerce has expanded its customer service center in Korea and increased the number of Korean-speaking staff.
The monthly visitors to the Chinese platforms are already closing in towards their Korean domestic rivals. According to The Korean Times, in October 2023, Coupang recorded 28.46 million in visitor numbers, AliExpress recorded 6.13 million, and Temu flowed with 2.66 million. In January Temu recorded 4.60 million, almost doubling from 2023. Now, Temu has become a company with multiple Super Bowl advertisements. Temu is also deploying a large-scale online advertising strategy in the domestic market. According to statistics from mobile big data company IGAWorks, the new installation count for the Temu app in January reached 2 million, securing the top position. This record has been maintained for the four consecutive months since 2023.
The aggressive approach of Chinese companies to dominate the Korean market is expected to intensify. Alibaba Group is preparing to penetrate Korea even more through the wholesale platform 1688.com. Many domestic online sellers on platforms like Coupang currently purchase goods from 1688.com through Chinese shipping agencies. This has raised concerns that C-commerce could even more dominate the Korean e-commerce market.
There are few specific measures to control this C-commerce dominance in Korea. Consumers Union of Korea (CUK) pointed out that there are no clear regulations to sanction overseas e-commerce operators under Korean law.
