South Korea - Country Commercial Guide
Selling Factors and Techniques

Identifies common practices to be aware of when selling in this market, e.g., whether all sales material need to be in the local language.

Last published date: 2020-09-21

Overview

Korea is a country with intense, demanding, and eager consumers. Also, Korea’s retail sector is popular among the over 4.2 million Chinese visitors (as of 2017) that come to Korea every year. Although the number decreased from 8.1 million in 2016 because of a political dispute between China and Korea, Chinese tourists are returning to Korea as the tension subsides. U.S. companies wanting to sell into this market should endeavor to follow these guidelines:

· Adapt company products and procedures to Korean tastes and conditions.

· Communicate regularly with both your Korean business partner and customers.

· Exhibit a consistent, firm, and long-term commitment to the Korean market.

· Work at building long-term relationships.

· Augment the efforts of your local representative by visiting Korea frequently.

· Invite Korean representatives back to the home office periodically to ensure they are fully informed, motivated, and up-to-date on your company and its offerings.

· To the extent possible, allow the distributor/agent to select from all the U.S. company’s product lines, as not all products may be marketable in the Korean market.

· To the extent possible, consider utilizing an exclusive distributor for the entire Korean market in order to prevent price competition between distributors. This can lead to damaging profitability and disputes between distributors.

· Hold demonstrations, seminars, and exhibitions of products in Korea.

· Increase the distribution of technical data and descriptive brochures.

· Assist local representatives with follow-up on sales leads.

Trade Promotion and Advertising

The U.S. Government’s primary trade promotion agency in South Korea is the U.S. Commercial Service. Located within the U.S. Embassy in Seoul, it is an agency of the U.S. Department of Commerce, International Trade Administration. Consult: http://www.export.gov/southkorea.

In Korea, the Commercial Service works with numerous trading and commercial entities, to include:

  • The Korea International Trade Association (KITA): http://www.kita.org/. KITA organizes overseas trade missions, conducts market surveys, assists potential foreign buyers or sellers, and offers consultation and personalized advisory services regarding trade rules and regulations, export and import procedures, business management, market research, technology development and taxation.  KITA has offices in Washington, DC, and New York. It also has seven offices in other countries.
  • The Korean Chamber of Commerce and Industry (KCCI): http://english.korcham.net/nChamEng/Service/Main/appl/Main.asp. KCCI is Korea’s largest private economic organization, with 71 regional chambers and approximately 135,000 members. Since its establishment in 1884, KCCI has contributed to the growth and development of the national economy and also to the enhancement of Korea’s status in the international community.
  • The Korean Importers Association (KOIMA): http://www.import.or.kr/. KOIMA is Korea’s primary import association and represents over 4,000 businesses.
  • Korea hosts many trade shows and exhibitions each year. Historically, many of these shows are highly focused on B2C activities and, thus, are not necessarily attractive to U.S. firms interested in meeting qualified companies, versus end-users. The following trade facilities and event schedules may be of interest to U.S. firms:

COEX: http://coex.co.kr/eng - Korea’s largest full-service trade show organization, has 36,027 square meters of exhibition space. Hundreds of shows (B2B and B2C) are held throughout the year.

SETEC: http://eng.setec.or.kr/index.do - The Seoul Trade Exhibition Center is operated by the Korea Trade-Investment Promotion Agency (KOTRA).

KINTEX: http://www.kintex.com/client/_eng/index.jsp - Located in Ilsan, Gyeonggi-do, near Seoul, KINTEX has the largest exhibition space in Korea, with 108,566 square meters.

BEXCO: http://www.bexco.co.kr/eng/Main.do - Located in Busan, Korea’s second largest city (southeast Korea), BEXCO holds dozens of B2C and B2B national exhibitions and features 26,446 square meters of exhibition space.

Advertising

A geographically small country, Korea is an exciting place to launch effective, sophisticated, state-of-the-art advertising. Korean advertisers are highly creative and utilize a host of media to capture consumer attention.

Particular aspects of Korea’s advertising market include the following:

· Korea’s advertising market is the eighth largest in 2018 among member nations of the OECD, according to the Korea Advertisers and Media Audit Korea.

· Total media advertising spending in Korea reached $11.97 billion, up 2.3 percent in 2019. 

· More than 80 mega-LED screens strategically pepper commercial areas (in Seoul and other cities) with 24/7 promotions. Monthly advertising opportunities exist.

· Thousands of excellent promotional sites at/in Korea’s well-used bus stops, subway stations, railways, and airports should be considered by U.S. firms.

· On-line advertising offers significant market growth potential. In 2019, Korea’s digital advertising reached $5.6 billion, growing by 21 percent compared to the previous year. Mobile advertisements made up the biggest proportion of digital marketing, with a 67 percent share. Display ads account for 33 percent, search ads for 47 percent, and visual ads for 20 percent of total on-line advertising. Currently 19 million households in Korea, or 99 percent of all, use the Internet (45 million Koreans are active internet users – or 95.1% of the population). The Korea On-line Ad Association (KOA) can be found at following website: http://www.onlinead.or.kr.

· The presence of over 3,200 foreign (to include all major ad agencies) and Korean advertising agencies.  Foreign equity participation is permitted at 100 percent.

· Hundreds of TV and radio stations, including:

KBS I, KBS II: TV and radio stations owned/operated by the Korean government

MBC, SBS: Independently operated, but with ROK government influence (Consult: www.kobaco.co.kr/eng)

· Comprehensive Programming Channels:

Launched on December 1, 2011, four new nationwide networks supplement existing conventional free-to-air TV networks like KBS, MBC, SBS, and other smaller channels. Unlike land-based television channels, new comprehensive programming channels can broadcast for 24 hours and commercial breaks are allowed. In Korea, over 90 percent of the population watches cable or satellite TV, so the influence of these comprehensive programming channels is strong.

Channel A www.ichannela.com is managed by Dong-A Media Group. The Dong-A Media Group consists of twelve affiliate companies, including Dong-A Ilbo, the leading newspaper in Korea since 1920.

TV Chosun http://www.tvchosun.com/main.html, also known as Chosun Broadcasting Company, is owned by the Chosun Ilbo-led consortium.  Chosun Ilbo is one of the major newspapers in South Korea, with a daily circulation of over 2,200,000.

JTBC http://jtbc.joins.com/ is managed by the JoongAng Media Network. JoongAng Ilbo is one of the major newspapers in South Korea.

MBN www.mbn.co.kr, also known as Maeil Broadcasting, Inc., is owned by Maeil Business Newspaper.  MBN was formerly a news channel, between 1993 and 2011. It transitioned to a general programming cable TV channel after 17 years of operation. 

•  The Korea Advertising Review Board (KARB: http://www.karb.or.kr/) is responsible for advertising regulation & compliance.

•  The Korean Fair Trade Commission (KFTC: http://eng.ftc.go.kr/) assures accuracy in advertisement. 

•  Korean Cable TV Association (KCTA: http://www.kcta.or.kr/).

•  The Korean cable TV industry serves 32 million subscribers, with 99 system operators offering over 200 programs. Korea Digital Broadcasting (KDB), a subsidiary of Korea Telecom (KT: http://www.kt.com/eng/) broadcasts more than 150 satellite channels to over 93 percent of the households.

•  There are seven leading shopping channels in Korea: GS, Hyundai, CJ, Lotte, Shinsegae, NS and Home & Shopping. In 2019, Korea’s market scale of the home shopping industry reached USD 17.4 billion.

Pricing

In Korea’s export-driven economy, price competitiveness is a key factor. Korean manufacturers try to purchase lower-priced, quality raw materials or equipment.

Korean buyers generally consider that U.S. goods:

· Have an overall good reputation.

· Are of high quality and good performance.

· Are relatively expensive, especially because of shipping and other logistical costs.

· According to the Korean Act on Consumers, consumer items are required to be labeled with the following (with specifics varying among products):

  • Denomination, use, ingredients, material quality, performance, size, price, capacity, permitted number of goods and contents of services
  • Name (including address and telephone number) of the enterprise that has manufactured, imported, sold or provided goods, etc., and the origin of the goods
  • Method of use, matters of caution and warning in use and keeping
  • Date of manufacture, quality guarantee period or, in case of goods such as foods, medicine etc., which are apt to be altered during distribution, the validity period of such goods
  • Dimension, location and method of indication, and Organization (including its address and telephone number) and method of settlement for any complaint on goods etc., or any consumer’s damage due to goods, etc.

A 10 percent value-added tax (VAT) is included on services and products.

Commissions in Korea are dependent upon the type of product and the transaction amount. For larger contracts, commissions generally decline as the contract value for a major purchase/acquisition/contract increases.

Sales Service and Customer Support

Considered secondary to product and price considerations, after-sales service in Korea by foreign suppliers is often found lacking. After-sales service and customer support by Korea’s big conglomerates, such as Samsung and LG, are often seen as better than the services offered by global enterprises or international SMEs. Korean consumers are very demanding in terms of customer support. After sales service and customer service in general should be managed closely, especially given the competition of third countries in this market. Servicing is/should be an important component of the “sale.”

The best approaches for after-sales service and customer support include:

· Resident or offshore engineers (Japan or Taiwan) working with local engineers; service contracts should be considered.

· Establishing a regional servicing facility which can effectively service and support equipment sold in Korea.

· Training service and customer service personnel via U.S.-based programs.

Local Professional Services

Korea has a highly-developed economy with a full range of professional services:

  • Agents/distributors
  • Law firms
  • Major banks
  • Major real estate and real estate consultancy firms, accounting companies and human resource firms

The “Featured U.S. Exporters” (FUSE) site provides information on how you can advertise products on our worldwide website, in various languages, for a small fee. Contact U.S. Commercial Service Office in Korea at Office.Seoul@trade.gov,for more information.

Principal Business Associations

For principal business associations in Korea, please see visit Commercial Service Office in Korea website at https://www.trade.gov/southkorea.

Limitations on Selling U.S. Products and Services

With the signing of the U.S.-Korea Free Trade Agreement in 2012, in general, U.S. companies will not face formal limitations. However, there are special circumstances where formal or informal limitations may exist. For additional information, please contact a Commercial Specialist from the U.S. Commercial Service in Seoul:  Office.Seoul@trade.gov.