South Korea eCommerce
The South Korean cross-border e-commerce market is constantly expanding at a growth rate of 12 percent (CAGR) from $2.7 billion in 2018 to $4.8 billion in 2022, and the convenience of entering the South Korean market via cross-border e-commerce is progressively enhancing. Over half (52 percent) of South Korean online shoppers have engaged in cross-border purchases (jik-gu in Korean) and the market is projected to exceed $5.5 billion by the end of 2023. Purchasing through jik-gu can be more price-competitive compared to buying domestically even after tariffs and international shipping fees. In addition, the South Korean government supports to reduce barriers and expedite customs procedures.
Among the total cross-border e-commerce sales in South Korea in 2022, 38 percent of goods were sourced from the United States. Main consumer needs for U.S. goods include health supplements, apparel, electronics, footwear, handbags and bags, and drinks and snacks. For the seller’s advantage, U.S.-made items under $1,000 are free from tariff under the United States-Korea Free Trade Agreement. This makes it easy for U.S. companies without a physical presence in Korea to export their products to Korean consumers via cross-border e-commerce.
While entering the South Korean market through cross-border e-commerce has become more convenient, it is essential for U.S. companies to be aware of the quick convergence of e-commerce with social media and domestic live commerce platforms. Live commerce allows live customer interaction and better display of products, leading to increased awareness and sales. Prominent platforms such as Coupang, Naver, and Kakao are augmenting sales through their own live commerce platforms, and the competition among brands already having a presence in South Korea is intensifying. Engaging in these marketing activities on social media and e-commerce platforms is crucial for a successful entry into the South Korean market. Thus, sellers should plan and secure marketing budget in advance after setting up a storefront. A thorough understanding of Korean market dynamics is crucial, along with the development of appropriate global sales and pricing strategies to maximize sales and profitability.