E-Exporting Report Korea

e-Exporting to Korea – A Guide for British Companies UK Trade & Investment

in partnership with UKTI’s E-Exporting Programme aims to help UK companies sell their products or services to millions of global consumers and grow their business through online exports.

UKTI’s E-Exporting Programme helps UK companies who are:

• New to selling online

• Already selling online, but need help with specific issues

• Experienced in online sales, but are looking to sell on multiple platforms globally

The programme enables you to:

• Arrange a free meeting through your local UKTI office to get expert international trade advice and support, and access to UKTI’s global network of contacts

• Meet an e-commerce adviser where relevant to help develop and implement an international online strategy

• Set up on e-marketplaces quickly and also identify new e-marketplaces around the world

• Access better than commercial rates to list on some e-marketplaces, including lower commission fees and ‘try for free’ periods

• Join our mailing list for opportunities to hear from industry experts, network with like-minded individuals and find out about e-commerce trends

• Access the E-Navigator – This is an intelligent database with information on the world’s top e-commerce platforms. UK companies will be able to use the tool to identify overseas e-marketplaces to sell through, based on consumer search data, country selection and product category. The E-Navigator will be publicly launched in November 2016 as part of UKTI’s new digital service.

For more information on UKTI’s E-Exporting Programme, visit gov.uk/e-exporting and follow @UKTIEcommerce on Twitter. UK Trade & Investment 1

UK Trade & Investment

UK Trade & Investment (UKTI) Contact us works with UK based businesses [email protected] to ensure their success in [email protected] international markets through exports. We encourage and Follow us support overseas companies Facebook: UK in ROK to look at the UK as the best Twitter: @UKTI_Korea place to set up or expand their @UKinKorea business. @UKTI

To find out more about how we can help you in the UK and overseas, please visit our website at: www.ukti.gov.uk About Intralink

Intralink develops and executes coordination and local 25 years of market experience. sales, licensing and investment representation. We work with strategies for European and our clients to commercialise Founded in 1990, Intralink American companies targeting technology, bring products to is headquartered in Oxford, new markets in East Asia. market, secure Foreign Direct England, and has offices in Through our proven Surrogate Investment, and source capital London, Berlin, Silicon Valley, Sales Program™, we provide from strategic investors. Boston, Shanghai, Tokyo, Seoul companies with a low risk, and Taipei. cost effective and practical Our clients are start-ups, small means to target these markets, and medium-sized enterprises, Contact us generate new or incremental government organisations and jonathan.cleave@ revenues, and establish an multinational companies in the intralinkgroup.com in-country presence through a automotive, energy, healthcare, Follow us local subsidiary, partnership or retail, technology and other Twitter: @Intralink_Asia acquisition. high-growth sectors. Through our team of over 60 full-time @Intralink_Korea In addition, we offer a range bilingual employees based in of pre- and post-market entry Asia, Europe and North America, services, including opportunity we offer a transparent and assessments, distributor and hands-on approach, extensive in­ supplier searches, investment country contacts, and over 2 e-Exporting to Korea – A Guide for British Companies

Contents

1. e-Exporting Opportunities for 4 4. Cross-border Online Shopping 20 British Brands 4.1. Market Overview 20 2. Korea Overview 6 4.2. Key e-Export Categories 23 3. e-Commerce in Korea 8 4.2.1. Food & Beverages 23 3.1. Market Overview 8 4.2.2. Fashion 24 3.2. Key Characteristics 10 4.2.3. Beauty & Cosmetics 26 3.2.1. Policy 10 4.2.4. Baby Products & Toys 27 3.2.2. The Consumer 11 4.2.5. Home & Living 29 3.2.3. m-Commerce 11 5. Market Entry Strategies 32 3.2.4. Payments 11 5.1. Market Entry Methods 32 3.2.5. Delivery 12 5.1.1. Level 0: Using a Global 32 3.2.6. Customer Service 12 e-Commerce Platform 3.3. Open Markets 13 5.1.2. Level 1: Website with Shipping 33 Options to Korea 3.3.1. Gmarket (eBay) 15 5.1.3. Level 2: Website Localisation 34 3.3.2. Auction (eBay) 15 5.1.4. Level 3: Dedicated 35 3.3.3. 11th Street (11ST) 16 Customer Support 3.3.4. Coupang 16 5.1.5. Level H: The Hybrid 36 3.3.5. WeMakePrice 17 5.1.6. Level 4: Multi-channel 37 3.3.6. Ticket Monster 17 5.2. Marketing 38 3.3.7. Naver Corp 17 5.2.1. Level 1: Adding Korea to 38 3.4. Online Shopping Malls 18 Current Digital Media Plan 5.2.2. Level 2: Social Media 39 and Local Internet Personality Sponsorships 5.2.3. Level 3: Using Local 39 Digital Media Agency 6. Logistics and Customs 40 6.1. Logistics 40 6.2. Customs 41 UK Trade & Investment 3

Table of figures

Figure 1: Retail and e-Commerce 8 Sales Growth Figure 2: Cross-border e-Commerce 20 Market Size (GBP) Figure 3: Overseas Direct Purchase 21 Clearances by Country (% of Total) Figure 4: Product Categories 21 Purchased Directly from Overseas (% of Total) Figure 5: Korea’s e-Commerce 22 Landscape Figure 6: Search Engine Market 39 in Korea Figure 7: Manifest Clearance 42 Figure 8: Rapid Entry / 43 Simplified Clearance Figure 9: Standard Clearance 43

The exchange rates used in the report are as follows: GBP 1 = USD 1.46 = KRW 1,740 In this report, “Korea” is used to refer at all times to South Korea 4 e-Exporting to Korea – A Guide for British Companies

An Overview of e-Exporting Opportunities South Korea’s e-Commerce market is thriving and offers British retailers and brands huge opportunities. With rising disposable incomes, a technologically savvy and increasingly outward-looking population, and an Internet and mobile telecommunication infrastructure that is among the best in the world, Korea is at the forefront of both domestic and cross-border e-Commerce trends.

British goods enjoy a strong surpass GBP 32bn by 2018. The country’s population subscribed to reputation among Koreans country’s e-commerce industry LTE services, each browsing on an and are known for their design, is very competitive, with open average of 2.3 mobile devices. One quality and heritage. Whereas market platforms (Gmarket, third of smartphone users make a US e-commerce platforms have 11th Street), social commerce purchase with their phone at least dominated the overseas direct platforms (Coupang, Ticket once a week and retail mobile purchasing market in Korea until Monster) and online shopping conversion rates are twice as high now, market watchers believe that malls (SSG, Lotte Mall) all vying for as the UK. Some e-commerce direct purchases from the UK, market share. It is also a market websites in Korea record as much along with China and Germany, dominated by domestic brands – as 70-75% of their transactions on will see substantial growth over the global giants of e-commerce mobile. the coming years. such as Amazon or eBay have either failed to penetrate the Cross-border The Korean market and to secure a foothold. e-Commerce in Korea e-Commerce Market Korean cross-border e-commerce Korea’s advanced Internet Korea boasts the world’s seventh has grown considerably over the infrastructure plays a key role largest e-commerce market and past decade and surpassed GBP in facilitating the growth of trails only behind China and 1bn in 2015. Local consumers e-commerce. Korea is the only Japan in the APAC region. The are increasingly turning to country in the world that boasts e-commerce market was worth foreign websites to secure better average download speeds of GBP 25bn in 2015 (9% of total prices and purchase products over 20Mbps. m-Commerce is retail sales) and, with 13% year­ that are not available, or too particularly well developed in on-year growth, is expected to expensive, domestically. The Korea with over 80% of the UK Trade & Investment 5

current government is supporting • Beauty & Cosmetics (small-batch On the other hand, e-commerce crossborder shopping as a way to cosmetics, organic cosmetics, is increasingly understood to play lower Koreans’ cost of living and male grooming, perfumes, etc.) a complimentary role to offline to tackle the common practice of sales rather than replacing brick­ domestic importers, distributors • Baby products & Toys (organic/ and-mortar sales channels. Korean and retailers inflating prices. US hypoallergenic baby cosmetics, consumers, as elsewhere, engage e-commerce sites account for 74% clothes, educational toys, etc.) in webrooming (researching a of all cross-border e-commerce product online and the making sales in Korea, while Chinese • Food & Beverage (health the purchase in-store) and sites make up 11%. Within the supplements, organic food, showrooming (visiting a store to EU, Germany is the number one confectionery, etc.) research and select a product player with 5.4%. Although the before buying it, usually for a UK accounts for an impressive • Home & Living (home décor, cheaper price, online). Therefore, 11% of total global Internet kitchen/tableware, bed/ finding a distributor that can retail sales, only 1.4% of cross­ bathroom accessories, pet develop the right offline channels border e-commerce transactions accessories, etc.) for a company’s products remains conducted in Korea involve the important for increasing both UK. Market Entry Options for awareness and trust in a new e-Exporters foreign brand. Key e-Export Categories There is a range of strategies British goods enjoy a strong for UK brands to choose from reputation among Koreans in order to address Korean and British products are often consumers’ needs directly, some marketed in the country with of which require little effort and/ specific reference to their origin. or investment. On the low-cost Men’s fashion, accessories, end of the spectrum, it is simply confectionery, home décor, possible to add a Korea shipping highend beauty and grooming option at checkout. For an already products are just a few examples growing Korean customer base, of the UK’s strengths in retail. a more targeted approach would There is a clear overlap in the entail website localisation. Beyond areas in which the UK excels and this it may also be worth investing the products that are increasingly in a dedicated Korean customer sought by Koreans looking to service centre, as Koreans demand make overseas direct purchases. excellent after-sales service. Key cross-border categories Finally, it is possible to explore include: hybrid business models that involve working directly with local • Fashion (premium/mass apparel, e-commerce platforms that are in outdoor wear, accessories, etc.) some cases able to be the de facto distributors in the country.

6 e-Exporting to Korea – A Guide for British Companies

Korea Overview

Key Points Economy in the world to have FTAs with the European Union, the United Korea is a dynamic economy • Korea is the world’s 11th largest States and China. In comparison with a GDP of just under GBP 1tn economy with a GDP of just with Japan, which has relied in 2015. Global names such as under GBP 1tn more on its large domestic Samsung, Hyundai, Doosan and market, Korea has traditionally • Korea is open for trade. It is LG have powered the country been a much more outward­ the only country in the world over the last half century to facing economy and now ranks to have Free Trade Agreements become the 11th largest economy as the 7th largest trading nation with the EU, the US and China in the world with a GDP per in the world. The country’s main capita of close to GBP 20,000. • The EU makes up 9% of Korea’s trading partners are China (25% The Korean economy grew by global trade. The UK is Korea’s of total exports and 16% of total 2.6% in 2015 which, although second largest EU trading imports), the United States (10% good by global standards, is less partner of exports and 8% of imports) than the high single-digit growth and the European Union (9% of • The Korea-EU FTA allows tax­ that the economy enjoyed in its both exports and imports).1 free imports of products with a recent past. As the companies value of less than GBP 104 that dominated Korea’s growth over the last fifty years became The Korea-EU Free Trade Agreement • Korea’s rising incomes, focus on more and more entrenched convenience, high population across all sectors of the economy, In May 2010 Korea became the density and world-class Internet successive governments have first Asian country to sign a FTA infrastructure underpin a tried to mitigate the country’s with the EU. The Korea-EU FTA rapidly growing cross-border dependence on a small number of was implemented on July 1st 2011. e-Commerce market large conglomerates. The majority of import duties were removed immediately and Since the turn of the century, the remaining duties, with the Korea has placed trade exception of certain agricultural liberalisation at the forefront of products, will be eliminated on its foreign policy. The country July 1, 2016. Since the FTA was has signed more free-trade signed, the value of Korean agreements (FTA) than any imports from the EU increased other and is the only country from GBP 32.7bn in 2011 to UK Trade & Investment 7

GBP 43bn in 2014. The EU has Population and Lifestyle in high-rise apartment buildings, become Korea’s third-largest most of which are equipped Korea has a population of just trading partner and its top foreign with high-speed broadband over 50 million, approximately investor. and an office where deliveries half of whom lives in or around can be received even when the the Seoul metropolitan area. The UK is Korea’s second largest recipient is at work. Long working This area includes Seoul city, export market (GBP 3.99bn) and hours mean that convenience is Gyeonggi province that surrounds its second largest import market prioritised and the low birth rate the capital city, the port city of (GBP 5.14bn) within the EU, trailing ensures a greater proportion of Incheon and satellite cities such only behind Germany. UK exports disposable incomes can be spent as Bundang and Ilsan. Seoul is to Korea grew by 47.5% between on oneself or spread across fewer divided by the Han River, with the 2010 and 2014. In 2015 Korea was children. old city situated north of the river the second largest market in Asia/ and the trendy Gangnam district Oceania for UK goods exports located to the south of the river. (excluding the logistics hub of Other major Korean cities include Hong Kong) and a top 20 market Busan, Daegu and Daejeon. worldwide. The UK’s main exports to Korea are industrial and B2B in nature, but retail, led by health Korea’s meteoric economic growth and beauty products, jewellery, has taken its toll. Koreans work beverages and spirits, is on the more than 2,000 hours a year, rise. which is considerably more than the 1,669 hours worked by UK The Korea-EU FTA allows workers.2 The average woman products with a value of less in Korea gives birth to just 1.2 than GBP 104 per shipment to children compared to 1.9 children pass through customs within a in the UK.3 Young Koreans are couple of business days, without getting married later or shunning additional duties or taxes paid by marriage altogether. One-person the customer. Products valued households account for 25% up to GBP 1,380 can be imported of the total and this figure is by Koreans for personal use with expected to climb to 35% by 2035. reduced paperwork. e-exporters can skip a lot of formalities While these factors present clear required of traditional exporters, challenges, they are largely such as product registration, conducive to a flourishing safety testing, labelling, etc., e-commerce market. The as long as the customer is extremely high population density importing the product for his or means that 60% of Koreans live her own use. 8 e-Exporting to Korea – A Guide for British Companies

e-Commerce in Korea

Key Points 3.1. Market Overview Figure 1: Retail and e-Commerce Sales Growth • Korean e-Commerce was Korea is the world’s 7th largest worth GBP 25bn in 2015 and is 300 e-commerce market and APAC’s expected to reach GBP 33bn by 275 3rd largest e-commerce market 2018 250 after China and Japan. The 225 • Policy is increasingly favourable industry was worth GBP 25bn 200 4 to cross-border e-Commerce – a in 2015, up 11% from 2014 and 175 great opportunity for British expected to grow to GBP 33bn 150 5 brands by 2018. e-Commerce sales 125 volume accounts for 9.8% of 100 • British brands can both e-Export the country’s retail sales and it 75 and maintain a separate in­ is believed that this number will 50 country offline distribution at 6 grow to 12% by 2017. 25 the same time – parallel import 0 policy allows for more flexibility The Struggles of Global 2017 2013 2012 2015 2016 2014 2018 2018 in developing sales channels e-Commerce Brands Retail e-Commerce sales (GBP bn) • m-Commerce accounts for the Koreans lean strongly towards Total retail sales (GBP bn) majority of online sales – a good solutions that are designed mobile experience is key for Koreans and in the Korean Source: eMarketer language. Global e-commerce • Koreans generally use credit companies have struggled in cards for cross-border Korea, despite their vigorous e-Commerce but mobile marketing efforts. Yahoo stopped payments are growing producing online content after • The Korean consumer is used to struggling against local Internet quick deliveries and a very high companies such as Naver and level of customer service Daum. Naver and Daum also dominate the local search engine • The dominant e-Commerce market, dwarfing the global websites in Korea include giants, Google and Yahoo.7 Coupang, Gmarket and Auction Similarly, global brands such as eBay and Groupon struggled to penetrate the Korean e-commerce market and had to

10 e-Exporting to Korea – A Guide for British Companies

resort to acquiring local players. distributorship agreements Groupon, the American company that allowed them to maintain best known for its “flash sales”, high margins. Under pressure closed down its Korean subsidiary from increasingly well-informed Domestic e-Commerce after failing to compete against consumers, the government has platforms are run by Koreans the three domestic players, started to ease direct purchases for Koreans, are fully localised, Ticket Monster, Coupang and from overseas as a way to ease available in both desktop and WeMakePrice. Groupon then the average Korean’s living mobile, work closely with local bought Ticket Monster for GBP expenses.10 Indeed, foreign telecommunication companies to 180mn in 2014 only to resell its brands can now utilise parallel 8 improve the mobile experience 46% stake in April 2015. eBay exports to Korea: they can have and work with domestic credit followed a similar path. Unable to an offline in-country distributor card companies to provide leverage its globally recognised while continuing to sell directly discounts and loyalty benefits. It brand in Korea, the company to consumers via their global is a tightly-knit ecosystem that acquired Auction in 2001 and shopping websites. then Gmarket in 2009 for GBP foreign e-Commerce platforms, 830mn.9 such as Amazon, may find Also in recent years Korea challenging to break into. UK has emerged as a cultural Amazon, another global retailers should focus on utilising powerhouse and Korean films, e-commerce behemoth, despite locally-established channels or dramas and pop music have being one of the most visited specialised online malls. become staggeringly popular non-Korean websites, only across Asia. This has presented Senior Manager – Amazon Korea opened its Korea office in late many opportunities for Korean 2015. Amazon Korea focuses companies looking to sell on outbound sales of Korean products and clothing that products. An Amazon Korea feature in the country’s exported insider stated that Amazon.com content. Foreigners spent GBP has steady traffic amongst 208mn on Korean e-marketplaces consumers based in Korea, but 3.2. Key Characteristics in 2013 and this figure rose not enough of it to justify opening 3.2.1. Policy by 56.8% to GBP 335mn in a full Amazon.co.kr website. It Recognising consumers’ growing 2014.11 However, until recently is up to merchants on Amazon interest in e-commerce, the no transaction could be made whether they want to ship to current Korean government is on a Korean website without Korea or not. pushing to deregulate the digital a certificate of authentication environment. On the one hand, which required the Active X add­ Korea has traditionally been a on to Internet Explorer. Other market of high consumer prices browsers (e.g. Firefox, Chrome) often caused by import and sales were not compatible and there channels that were dominated was no way to simply type in a by Korean conglomerates. The credit card number, CVV code and conglomerates enjoyed exclusive authorise purchase. Not only did UK Trade & Investment 11

this greatly hinder cross-border The average Korean household mobile at least once a week, and e-commerce it also stunted has GBP 2,225 of disposable completes 60-70% of his or her the growth of digital payment income each month, of which purchases on a mobile device.18 In systems. The Korean government GBP 1,756 is spent and the rest fact, some local companies record announced in March 2015 that it is saved or invested. Living as much as 70-75% of their would abandon the mandatory expenditures account for GBP transactions being completed use of the system in the hope of 1,334 (while GBP 322 is paid in on mobile. Forty-five percent of spurring cross-border trade. taxes), and these include GBP e-commerce transactions are 176 on food and beverages, made by smartphones in Korea 3.2.2. The Consumer GBP 83 on clothing, GBP 54 on versus 41% in Japan and 18% Koreans are demanding household items and around GBP in the UK.19 Furthermore, retail customers who represent two 120 on other goods and services. mobile conversion rates are two seemingly conflicting buying UK exporters can therefore times higher in South Korea behaviours: bargain seeking target a share of about 32.4% (6.7%) than the UK (3.2%). to save money and a strong of the average household’s total This may be due the fact that preference for superior product monthly living expenditures, or largescreen phones (phablets) 16 quality. Online retailers generally about GBP 426. that offer a better shopping target young mums, young adults experience are extremely popular in their 20-30s, and middle-aged 3.2.3. m-Commerce in Korea, but also suggests that females in their 40-50s.12 These The Korean government has the mobile experience is well­ shoppers’ buying preferences made investment in the Internet designed to get consumers are mainly influenced by local a national priority since the early from browsing to checkout celebrity endorsements, TV drama 1990s and the country is well seamlessly.20 and movie endorsements, social known for its leading position media word-of-mouth, discussion in broadband penetration and 3.2.4. Payments boards, TV commercials and social download speeds. The country Credit cards are by far the most media campaigns.13 According to records average download speeds common payment method in Korean credit card operators, men of 20.5Mbps, which is the fastest Korea with 74% of all online tend to spend 15% more money in the world. By comparison, transactions being settled by online across fewer transactions, Japan records average download card versus the global average of while women shop online more speeds of 15Mbps while the UK 53%.21 Koreans own four credit often but generally buy things averages 13Mbps.17 cards on average, the most in the that are less expensive.14 50% of world and more than 3 times as Korean respondents in Nielsen’s Korea has also long been at the many as the average UK citizen 2016 survey on e-commerce said forefront of mobile technology, (1.2).22 The vast majority of they had purchased something both in relation to handsets and Korean consumers use domestic online in the last 6 months. The the supporting network, and credit cards that are tied to the corresponding figure for Korea’s 80% of the population uses international payment processing neighbour, Japan, was 32%.15 a smartphone. The average networks of Visa, MasterCard Korean owns 2.3 mobile devices, and American Express. The fact browses e-commerce websites on that Korean consumers prefer 12 e-Exporting to Korea – A Guide for British Companies

to pay online with credit cards is 3.2.5. Delivery 3.2.6. Customer Service favourable to British e-exporters Delivery speed is extremely Most of the large e-commerce as it makes the payment process important to Korean online platforms in Korea have reached straightforward. In this respect, shoppers and even the 18-20 million registered users Korea stands in stark contrast to tiniest delay can result in and 30,000-50,000 vendors. the Chinese market where most dissatisfaction, complaints Executives from eBay Korea, e-commerce payments are either and negative online reviews. Coupang and 11th Street all cash-on-delivery (COD) or made e-Commerce companies agree that the time when using country-specific 3rd party recognise this fact and are they could compete on prices online payment systems (e.g. exploring the use of in-house and promotions is over and Alipay), and only 5% of 4.2 billion delivery systems rather than now the only way to both cards in circulation are Visa or relying on traditional delivery boost new growth and retain 23 MasterCard. companies. This way they can existing customers is to provide guarantee delivery terms and better customer service than While credit cards are timelines, as well as better the competition. Same-day overwhelmingly dominant manage exchange and return delivery, hassle-free returns in Korea, with the recent requests. Coupang started this policies, 24/7 call centres with abolishment of the authentication trend and, based on its success, personalised support are just process requiring Active X, the rest of the industry seems a few examples of how these payment methods such as PayPal to be following suit. companies compete for the and Alipay have started to gain modern Korean e-commerce some traction. Mobile payments customer. are also growing in popularity.24 Korean enterprises are now offering easy-to-use mobile/online payment services. For instance, mobile wallets such as Kakao Industry Insider’s Tip Pay or Naver Pay now allow for

credit/debit card information to Coupang offers in-house, next day delivery of some be stored on users’ smartphones commodities such as water, milk, toilet paper, baby nappies, allowing for instant payment both etc. and a selection of their other best-selling products. The online and offline. service is called Rocket Delivery and is akin to Amazon Prime. Korean Internet chatrooms and blogs are abuzz with talk of “Coupang Men”, praising their extra-efficient delivery service, cheerful demeanours and flexibility. Other e-Commerce companies are working on replicating this model. e-Commerce insiders claim that since it is hard to compete on prices of commodities, it makes more sense to compete on customer service (e.g. fast free delivery, easy refunds/returns, etc.) UK Trade & Investment 13

CLOSER LOOK Industry Insider’s Tip Strawberry Net offers tax refunds to Korean customers. Most successful e-Exporters to Korea do not charge customers If the perfumes/cosmetics shipping fees on return/exchange, respond to inquires very ordered by the customer quickly and do not ask too many questions. Korean customers are subject to additional generally expect that if, for instance, they did not like the colour taxes, the customer can of the product when it arrives, that is reason enough for the send the receipt and get a refund directly to the vendor to grant a free-of-charge return/exchange. Also, complaint credit card they used for handling can be a frustrating experience for both the seller and payment. Strawberry Net the buyer if the process is not conducted in Korean. does it voluntarily – a show of goodwill – and does not guarantee returns every time. The company found that Korean consumers like recommended, however, that companies such as eBay and this extra cushion very much e-exporters provide a high Alibaba. and come back to them more level of customer support Interpark, established in 1996, is often. to meet the expectations of generally considered the pioneer Korean consumers and to of Korean e-commerce. A second ensure that negative feedback generation of e-commerce Korean laws relating to is not circulated on the Korean retailers – open market platforms e-commerce stipulate that Internet – something that it is such as Gmarket and Auction – vendors shall provide refunds difficult for an e-exporter to find came to dominate the landscape if products ordered are not out about or remedy. in the early 2000s. Since received, or if the product is not 2010, online retailers such as in keeping with the way it was 3.3. Open Markets Coupang, Ticket Monster, and advertised on the website. This WeMakePrice, initially borrowing applies to both independent As elsewhere, there are two from Groupon’s social commerce online vendors operating main online sales channels concept, have emerged as the their own sites and those in Korea: open markets and sector’s heavyweights. These vendors using open market online shopping malls. An companies soon evolved into platforms such as Gmarket. UK open market is a website that e-commerce companies more e-exporters are governed by serves as an e-commerce akin to Amazon, in that they UK laws pertaining to business platform for vendors of all sizes combine an online shopping mall conduct in e-commerce and can to display their products and with an open market, offering a therefore handle complaints, connect with consumers. These platform for independent vendors refund/exchange requests platforms help facilitate online but also carrying own their stock according to the UK regulations transactions, taking a fee – of the most popular products and and their own policies, to usually a percentage of the sales brands. which users agree when value – from the vendor in return. purchasing goods. It is strongly This is the model employed by 14 e-Exporting to Korea – A Guide for British Companies

Coupang is a rising star not only aid in their decision-making have the amount of detailed of online retail, but of the tech process. Some research tools information rarely attainable industry in Korea as a whole. It include price comparison services offline, unless experienced sales was able to reach GBP 690mn such as Naver, direct dialogue staff can be questioned. (USD 1bn) in gross merchandise with sellers via website Q&A In terms of local online shopping, value in only 13 quarters from its sections, information exchange the most popular product inception in 2010, becoming the with other users via message categories are clothes and fastest e-commerce company boards, and visiting physical fashion accessories (18%), in the world to achieve that locations where products are travel and entertainment (17%), figure. Coupang is now moving displayed (showrooming) before home and car accessories away from social commerce and buying online. Webrooming – (12%), computers, computer transforming itself into “Korea’s the practice of doing product parts and accessories (11%) Amazon”. Coupang is currently research online to complete the and food (8%).26 These are the focused strongly on growth purchase in a brick-and-mortar products, either domestically rather than profits. The company store – is also increasingly cited manufactured or imported, that received an investment from as a buying pattern and 37% tend to be widely available for Softbank of GBP 700mn in 2015, of Korean consumers said that purchase offline as well, but which valued the company at they conducted online research people choose to buy them close to GBP 3.5bn. before buying groceries offline in online for convenience or price Korean consumers often engage 2014.25 One reason for this is that competitiveness. More and more in pre-purchase research to online store product descriptions Koreans are choosing to buy commodities this way. UK Trade & Investment 15

Key Player Profiles

3.3.1. Gmarket (eBay) Website global.gmarket.co.kr Established 2000 Employees 899 Revenue (2015) GBP 482mn Overview • The open market leader, focused on fixed-price sales. A subsidiary of eBay Korea, the site has a 38.5% market share, a total of 70,000 registered vendors, 19 million registered users and sees millions of transactions each month • Gmarket mostly caters to Korean consumers but the website offers limited availability in English and Chinese. It offers international shipping to over 50 countries • Gmarket is integrated with other Korean web services. It is possible to search for Gmarket items directly via Korea’s largest search engines – Naver and Daum • Gmarket’s revenues come mainly from sellers, who pay (1) a fee based on an item’s selling price, (2) a fee based on the starting price, and (3) an advertising fee. The sales fee (5-8%) is negotiable and can add up to 10-15% with other fees • Gmarket is investing into new revenue streams – reselling, same-day delivery, etc.

3.3.2. Auction (eBay) Website www.auction.co.kr Established 1998 Employees 899 Revenue (2015) GBP 482mn Overview • As a subsidiary of eBay Korea, Auction is one of the biggest open markets in Korea with a 26% market share and a total of 20 million users • Auction started as Korea’s first online auction marketplace but the model is losing popularity relative to the discount-based fixed price model • With 20 different categories offered, Auction also features the $1 auction, a co-auction, a second-hand marketplace, and luxury items section • Auction partners with certain Korean companies, such as department stores and electronics companies, to offer them a separate branded corner on its website 16 e-Exporting to Korea – A Guide for British Companies

3.3.3. 11th Street (11ST) Website english.11st.co.kr Established 2008 Employees 800 Revenue (2014) GBP 828mn Overview • Owned by SK Planet and part of the SK Group, 11th Street is the only domestically owned and funded e-commerce marketplace in Korea • 26.1% market share, 22,000 registered vendors and 21 million registered users • The website is offered in English and Chinese, and has a branch in Malaysia • 11th Street takes margin from sellers which is usually between 6-7% (with marketing fees this can be climb to 15%) • 11th Street acts as a vendor for some of the most popular products, which it buys in bulk and ships from its domestic warehouse • 11th Street provides a variety of partner discount and loyalty programs in association with its mother company SK Telecom • 11th Street also offers worldwide shipping services to more than 50 destinations

3.3.4. Coupang Website www.coupang.com Established 2010 Employees 1,200 GMV (2015 est) GBP 2bn Overview • Coupang is the world’s fastest-growing e-commerce company that grew to GBP 690mn of gross merchandise value (GMV) from Q1 2011 and Q3 2013 • 55.2% of social commerce market share • The company started as a Korean equivalent of Groupon, but quickly expanded to partnering with independent merchants and reselling physical goods • Coupang currently offers a curated selection of diverse merchandise, including baby goods, fashion, beauty products, consumables and home goods • Coupang, with its subsidiary Coupang America, offers a Coupang Global service whereby it purchases popular products in bulk in the US and sells them to Korean customers via with a guaranteed “within 5 days” delivery • Coupang offers a domestic same-day delivery service (Rocket Delivery) • Mobile sales account for more than 50% of sales and 70% of transactions • The company’s is valued at GBP 3.5-4.8bn and has taken investment from Softbank UK Trade & Investment 17

3.3.5. WeMakePrice Website www.wemakeprice.com Established 2010 Employees 1,200 Sales (2015) GBP 1.4bn Overview • Formerly known as Namu Internet, WeMakePrice is the second-largest social commerce website with 19.9% of social commerce market share • WeMakePrice puts special emphasis on items and services including restaurant coupons, spas/aesthetic treatments, exhibits, and travel packages • Unlike other social commerce companies in Korea, WeMakePrice is actively engaged in holding public events such as Beauty Fairs that feature popular domestic cosmetics brands and tutorial sessions with famous makeup artists

3.3.6. Ticket Monster Website www.ticketmonster.co.kr Established 2010 Employees 1,000 Sales (2014) GBP 967mn Overview • Ticket Monster (abbr. TMON), along with Coupang and WeMakePrice, is a leading social e-commerce company with 24.9% market share in Korea • The company operates in three main verticals: Goods, Local and Travel, and offers over 47,000 Stock Keeping Units (SKUs) through various partnerships with 15,000 merchants • In 2014, 70% of TMON’s transactions were completed on mobile devices and its customer base continued to expand into multiple age segments • In 2015, private equity investor Anchor Equity Partners and KKR acquired a controlling stake of Ticket Monster from Groupon

3.3.7. Naver Corp Website shopping.naver.com Established 1999 Employees 2,204 Revenue (2014) GBP 2.2bn Overview • Naver Corporation is a Korean Internet content service provider and developed Korea’s first indigenous search engine in 1999 (now over 80% market share) – Naver’s services also include digital maps and instant messaging • Naver launched its mobile shopping platform in 2015 • Naver Pay, makes Naver a one-stop platform for mobile shopping • Naver launched “Global Window” in January 2016, where it introduces foreign products and SME merchants from overseas who offer shipping to Korea – Currently focuses on products from UK, France and Germany – Five main product categories: fashion, beauty, living, kids and F&B – Customer service (Q&A, Shipping, Return, etc.) all in Korean – Shipping costs depend on sellers. Standard rate from UK is GBP 10 18 e-Exporting to Korea – A Guide for British Companies

3.4. Online Shopping Malls Shinsegae Group Ellotte (www.ellotte.com): Launched in 2013, Ellotte is an Korea’s oldest department Online shopping malls are online shopping mall owned by store and largest hypermarket websites operated by brands Lotte Department Store. It differs chain was formerly part of the that carry an assortment of from Lotte’s other online malls in Samsung Group. The Shinsegae that company’s own products that it only carries products from Group consists of Shinsegae or private labels and are usually Lotte Department Stores along Department Store (10 stores, designed as an addition to an with newly launched premium luxury brand positioning), Emart existing bricks-and-mortar retail brands. (137 super and hypermarkets operation. Online malls can also accounting for over 50% of the be shopping websites operated LOTTE.COM (www.lotte.com): group’s revenue), Shinsegae by large retailers carrying Launched in 2000, LOTTE.COM Food (importer and distributor of an assortment of products is Lotte Department Store’s main foods), Chosun Hotel, Starbucks provided by different brands online shopping mall, offering Korea and other subsidiaries. and vendors. In both cases the products from its department The group recorded combined website operator keeps stock of stores as well as individual sellers. revenues of GBP 13.3bn in 2014. the goods that it sells. Examples Lotte Homeshopping of online shopping malls include SSG.COM (www.ssg.com): Owned (www.lotteimall.com): Launched The Body Shop and Shinsegae by the Shinsegae Group, SSG. in 2001, Lotte Homeshopping Online Mall. COM is an online shopping mall operates its online mall, Lotte where consumers have access Large traditional retailers iMall, offering products sold via to a number of Shinsegae­ such as Shinsegae, Hyundai TV home shopping as well as owned shopping malls, including Department Store and Lotte, online catalogues. Shinsegae Mall, Shinsegae have been playing catch-up Department Store, Emart Mall, Hyundai Department with Internet-only retailers for Emart Traders and Boons Store Group e-commerce market share. While Apothecary. still small relative to e-commerce The Hyundai Department Store companies in terms of online Lotte Group Group (HDSG) deals with retail sales market share, they operate and distribution of food and other Subsidiaries of the Lotte Group their own online malls and work products, food manufacturing, include Lotte Department Store with open markets, registering food services, media and (31 stores, 48% market share), as “Premium Vendors”. One of entertainment, logistics, finance Lotte Mart (114 stores), Lotte the more common tactics that and IT services. The company Chilsung (soft and alcoholic these companies employ is to currently operates two online beverage manufacturer and consolidate multiple existing shopping malls that are designed licensor), Lotteria (Korea’s top e-commerce sites that they to appeal to the premium market. fast food franchise), Lotte Hotel, operate (e.g. separate grocery, The group’s combined revenues Lotte World (amusement park), premium fashion and home were GBP 6bn in 2014. Toys”R”Us and many others. The shopping sites) into single online The Hyundai group’s combined revenues in offerings. (www.thehyundai.com): Launched 2014 were GBP 38bn. UK Trade & Investment 19

in January 2016, The Hyundai GS Retail CJ Group offers nearly all products from GS Retail (www.gsshop.com) is a Originally the food manufacturing both Hyundai Department Store subsidiary of the GS Group, one division of the Samsung and Hyundai Homeshopping. of Korea’s largest conglomerates Group, CJ is now a formidable The difference is that the users and formerly part of the LG retail player, especially in of Hyundai Credit Card get Group. GS Retail focuses on pharmaceutical, cosmetics and additional benefits. medium and small-size retail. F&B. The CJ Group operates the Hyundai Hmall They have a network of over nation’s largest pharmacy chain (www.hyundaihmall.com): 8,000 GS25 convenience stores, – Olive Young – with over 460 Owned by Hyundai 260 GS Supermarkets and 105 stores nationwide. It also operates Homeshopping, Hyundai Hmall is Watson beauty stores (a 50-50 an online mall (www.cjmall.com) a shopping mall focused on items joint venture with the Hong Kong­ with a variety of products and traditionally sold via TV home based health and beauty chain). membership benefits. The group’s shopping, a market that is still The group’s 2014 revenues were revenues reached GBP 11bn in large in Korea. GBP 350mn. 2014. 20 e-Exporting to Korea – A Guide for British Companies

Cross-border Online Shopping

Key Points 4.1. Market Overview

Figure 2: Cross-border e-Commerce Market • Korea’s cross-border While many global brands in Size (GBP) e-Commerce industry reached a areas such as fashion, food 2018 (est) value of GBP 1bn in 2015 and is and beverages or beauty estimated to be worth GBP 6bn and cosmetics have enjoyed 2015 by 2018 popularity amongst Korean 2011 consumers since as far back as • Key Korean cross-border bn 0 1 2 3 4 5 6 7 the 1980s, small and medium­ e-Commerce categories include Source: Hyundai Research Institute fashion, cosmetics, baby sized retailers were, until products, food & beverage, and recently, at a disadvantage home & living due to geographical and sales channel barriers. The value of The UK accounts for only 1.4% • The UK accounts for 1.4% of cross-border online shopping (219,000 of customs clearances in cross-border online shopping exceeded GBP 1bn in 2015, a 2015) of the total purchases from shipments to Korea – there is six-fold increase compared to overseas websites – a number huge untapped potential for GBP 302mn in 2011.27 This value which could be significantly British brands of the industry is expected to higher and suggests that there reach GBP 6bn by 2018.28 With are huge opportunities in cross­ • The Korea-EU FTA, signed in the growth and diffusion of the border e-commerce for British 2011, ensures British brands Internet, inexpensive shipping brands.29 In a poll conducted by a are well placed to exploit this methods, and the help of EU- Korean economic newspaper in market Korea Free Trade Agreement, 2015, only 14.6% of respondents British retailers of all sizes replied that they had made a can now address Korean purchase directly from the UK consumers’ needs directly. versus 95% from the US.30 UK Trade & Investment 21

Figure 3: Overseas Direct Purchase Clearances Industry Insider’s Tip by Country (% of Total) The practice of importing products from abroad for personal USA use via e-Commerce is called “jik-gu”, which translates to China “direct purchase”. There are many chatrooms and forums on Germany the local Internet where Koreans share their experiences of Hong using foreign websites, and discuss product selections and Kong Japan prices. Products bought this way for one’s own use do not need to be safety-tested, equipped with a local language label UK or locally certified. However, they can be subject to additional France duties and taxes. Other % Percent 0 20 40 60 80 100

Source: Korea Customs Service addresses (warehouse) in the seller’s Figure 4: Product Categories Purchased country and handle international Directly from Overseas (% of Total) shipping to Korea at a fee. These Korean consumers can engage Dietary supplements services are still operational (those in overseas direct purchasing in & Vitamins shopping on Amazon.com and eBay. three main ways: Clothing com still often use shipping agents

F&B as not all merchants offer shipping • Use local e-commerce websites to Korea), but have suffered as more that facilitate transactions with Cosmetics Koreans purchase products directly

foreign vendors, usually via local Shoes from overseas sites and more agents (Gmarket, 11th Street, foreign websites offer affordable Ticket Monster, etc.) Accessories worldwide delivery options. Baby products & Toys • Use buying agents that Based on a poll run by MBN News, purchase products overseas and Electonics the most common reasons for using ship them to Korea (Poombuy, % Percent 0 5 10 15 20 cross-border online shopping are: Wizwid, etc.) Source: Korea Customs Service • Cheaper price (71.4%) • Use local or global shopping malls and e-commerce platforms Koreans have been using foreign • Brands not available in Korea (Coupang, Amazon, etc.) websites to shop online since the (20.6%) mid-2000s. Originally it was a niche sector dominated by buying • Larger variety of products agents (Poombuy, Wizwid, etc.), available (5%) who buy and ship products from a foreign country on the customer’s • Better quality of products (i.e. behalf, and shipping agents (Malltail, lower likelihood of counterfeit iPorter, etc.) who provide shipping products) (3%)31 22 e-Exporting to Korea – A Guide for British Companies

According to one market Figure 5: Korea’s e-Commerce Landscape research company, in 2015 the most frequently used overseas e-Commerce Facilitating Services Payment e-commerce websites by Koreans Local e-Commerce Search engines Local credit card were: platforms companies 1. Amazon.com (all categories) • Gmarket • Naver • Shinhan Card 2. eBay.com (all categories) • 11th Street (11ST) • Daum • KB Kookmin Card 3. iHerb.com (dietary supplements, • Auction • Google • Hyundai Card functional food) 4. Shopbop.com (female fashion) • Coupang • Bing • Samsung Card 5. 6pm.com (apparel, shoes, bag, • Ticket Monster • Lotte Card (TMON) accessory) • KEB hana Card 6. Amazon.co.jp, DrugStore.com, • WeMakePrice Walmart.com, Rakuten.com and Global e-Commerce Local couriers Bill to mobile others32 platforms • Amazon • Korea Post • SK Telecom In 2015 Coupang emerged as • eBay • CJ Korea Express • Korea Telecom the main disruptor on the cross­ • Hanjin • LG U+ border online shopping scene. • Hyundai Logistics A Coupang executive explained • Logen that to keep up with the cross­ • Ilyang Express border trend, the company has established a warehouse Local online Global couriers Mobile Payment and buying offices in California shopping malls System where they directly approach • Shinsegae • Royal Mail • KakaoPay manufacturers of the top 6,000 (SSG.com) • DHL • Samsung Pay products that Koreans buy from • el Lotte • FedEx • Naver Pay (N Pay) (ellotte.com) US websites (eBay, iHerb, Amazon, • UPS etc.), buy the products in bulk and • GS Shop sell to Korean consumers through • Hmall their online storefront. Since the Global online Shipping agents Global payment products go directly to consumers shopping malls processors using standard international • iHerb • malltail • VISA shipping (maximum GBP 144, • ASOS (asos.com) • iPorter • MasterCard in accordance with the U.S.- • Strawberry Net • American Express Korea FTA), Coupang does not (strawberrynet.com) have to deal with safety testing, • JBC • Shopbop registration or complicated customs procedures. This model Buying agents is now being replicated by Ticket • Poombuy Monster, 11th Street and Gmarket. • Wizwid UK Trade & Investment 23

Korea is expected to grow to 30% 2016, 15 of the top 20 bestselling CLOSER LOOK by 2025. All of these sectors have goods on Coupang’s “Coupang different competitive landscapes Global” subsection were health Ticket Monster is keen and offer different opportunities supplements and vitamins, three to work on establishing and challenges. were sauces and spices, with purchasing teams and cosmetics making up the final two warehouses in the US 4.2.1. Food & Beverages products. and Europe - potentially The food and beverage industry the UK. Ticket Monster may be one of the most is interested in working interesting yet challenging more with European industries in Korea for foreign brands as it recognises brands to find their place. Food Coupang’s relative strength Koreans are crazy about healthy and beverage currently comprises in understanding the US food, such as vitamins, fish oil, nearly 14% of all overseas direct market and its products. protein powders, kale chips and purchases in Korea and local In the near future Ticket other functional foods. We saw market experts still see significant Monster would like to the growing popularity of global growth potential. Cross-border become Korean consumers’ e-marketplaces and effectively e-commerce in F&B has its main supplier of and channel decided to become one for our obvious limitations, but most to premium European goods. Korean customers. We built our products that are not quickly warehouse in California to stock perishable can be traded this way up on products and ship them to 4.2. Key e-Export Categories without particular restrictions. our customers while still offering Coupang’s familiarity and the Based on interviews with Vitamins, Dietary Supplements highest level of customer service. executives from Korea’s key and Functional Foods Every month we look at the top retail groups and e-commerce 6,000 best selling products on companies, the most attractive There is a heavy emphasis top 10-20 American websites, sectors in e-commerce for British among the Korean public on and buy as many of those retailers include Food & Beverage, healthy eating. Koreans purchase products as we believe we can Beauty & Cosmetics, Fashion, substantial amounts of functional resell to Korea. Baby Products & Toys, and food online via websites such Home & Living. That is not to say as iHerb.com, Amazon.com or Senior Director – Coupang that these are the only sectors Coupang.com. Sales of dietary worth exploring but generally supplements and functional fast moving consumer goods foods, which include fish oil, are well suited for cross-border anti-oxidants, and vitamins, e-commerce. There are only three were worth GBP 160mn in 2015. countries in the world where The demand for regular foods e-commerce accounts for more that are associated with health than 4% of all FMCG market: UK benefits, such as organic food, (6%), France (4.3%) and South blueberries, and quinoa, have also Korea (13.2%). The figure for increased dramatically. In January 24 e-Exporting to Korea – A Guide for British Companies

It should be noted, however, that Sweets, Desserts and The most popular products the Korean F&B market can be Confectionery imported from overseas in Characterised by dietary fads. Notwithstanding Koreans love this category in January 2016, Greek yogurt, gluten-free pasta, for healthy foods, cross border based on combined statistics probiotics, cleansing juices e-commerce has also seen from Coupang and iHerb, were and bubble teas are just some an increase in thepopularity crisps, nachos, organic chocolate, examples of short-lived crazes of sweets, snacks and other multigrain cookies, waffle/pancake that come and go on a seemingly similar products. Accompanying mixes, lozenges and sweet random basis. Typically, these the astonishing popularity of waffle/pancake sauces. Based fads appeal to large portions of coffeeshops, cafés and bakeries on industry insiders’ comments the consumer base (larger than in in Korea, offline sales of sweets, and cross-referenced with cross­ the west) for a short time (shorter cakes, cookies and other desserts border e-commerce website than in the west). Dietary fads have beengrowing at a double­ statistics, British e-exporters sweep the market and disappear digit pace over the last five years. could also see opportunities in completely usually on 3-to-6­ But Koreans’ sweet tooth is the following product areas: black, month cycles. They offer both a evolving, and so are theways their green and herbal teas, jams and big opportunity for fast-movers, cravings can be satisfied. preserves, spices, condiments but also can be the undoing of an and sauces and nuts, nut butters, overconfident retailer. dried fruit and spreads.

4.2.2. Fashion CLOSER LOOK Fashion is one of the most popular Due to the increasing demand categories in cross-border online A prime example of a short- for high-end desserts among shopping in Korea, accounting lived fad in Korea is the Korean consumers, famous for 16% of all overseas direct “Kkokkomyeon” craze that and upscale foreign desserts purchases in 2015. According to elevated a minor player, brands (Magnolia Bakery, Joe Nielsen, 77% of South Koreans Paldo, to the domestic & The Juice, Mont St. Clair, claim to have bought clothes market leader briefly in the etc.) have entered the Korean online in the past year, which is late 2011. Released in August market, usually through more than any other country (the 2011, Kkokkomyeon was a partnership with local corresponding figure for the UK an instant noodle product department stores. We have is 67%).33 Koreans largely engage created by a popular Korean seen a 300% growth in sales in in direct overseas purchasing comedian together with recent years. Now is the time to of clothes and accessories not Paldo. The product gained make it available to even more because the brands are not sensational popularity with people via e-Commerce and available in Korea, but because over 100 million packs sold we are working on a same-day they cost less overseas – within the first five months. delivery service to facilitate it. consumer prices in this category However, as the buzz are perhaps the most inflated of subsided, sales fell sharply Dessert Category Buyer – all – and are available in a wider to just 14 million packs by Hyundai Department Store selection. February 2012. UK Trade & Investment 25

Sportswear and Outdoor Sports and outdoor wear accounts for 26% of Korea’s apparel industry and outdoor brands from abroad are popular among consumers. With a growing interest in a diverse range of sports and activities (e.g. soccer, hiking, golfing, biking, camping, etc.), the demand for sportswear that is functional yet versatile enough to adjust to different types of weather and activities has increased.

Watches, Accessories CLOSER LOOK • Jomashop (US) and Jewellery (www.jomashop.com) New Balance Traditionally most designer (www.newbalance.com), the watches and jewellery in Korea Casual Wear American sportswear brand, were sold in department stores Seoul is considered one of the is immensely popular in with high levels of customer most fashion-forward places in Korea amongst teens and service but also very high sales Asia.34 People often look online people in their twenties. The margins. Korean consumers now not only for brands they know product available in Korea seek cheaper options on cross­ and like but also for new items to is manufactured in China border e-commerce websites. add to their wardrobes. Brands and Southeast Asia under Products from this category like Abercrombie & Fitch or the licence by the E-Land regularly appear near the top of Polo Ralph Lauren are some of Group. While offline sales of crossborder e-commerce websites the bestsellers. Some notable the brand are strong, more in Korea. Other popular products examples of casual fashion and more Korean consumers include wallets, belts, purses, websites popular in Korea are are turning to cross-border suitcases, etc. Shopbop (www.shopbop.com) e-commerce seeking a wider and 6PM (www.6pm.com). One selection. New Balance Good examples of overseas of the most interesting success footwear purchases from fashion brands and retailers stories in this category is ASOS, the US are continuously e-exporting to Korea include: a company that has a partially near the top of most popular localised website , dedicated • Pandora (US) (www.pandora.net) e-commerce websites such Korean support staff and engages as Gmarket, 11th Street, • Daniel Wellington (EU) in a range of localised marketing Auction and Coupang. (www.danielwellington.com) events. 26 e-Exporting to Korea – A Guide for British Companies

Natural Cosmetics CLOSER LOOK CLOSER LOOK Organic, natural and paraben-free Avalon Organics ASOS (www.asos.com) beauty products have become (www.avalonorganics. generally targets young, popular among health-conscious com) is a US-based natural empowered females that Korean consumers. As many of organic health and beauty are active on social media. these products are still difficult products manufacturer. It The company reached out to find on the shelves, they is considered one of the to Pikicast, a Buzzfeed­ are mainly bought on foreign most popular foreign hair like website in Korea, and websites such as Amazon and care brands in Korea. As offered special discount eBay. Although online retail is conscious consumers have codes for their readers. It not yet the preferred channel for come to focus more on the successfully raised its brand mid-to-high-end cosmetic brands quality of ingredients, many organic cosmetics brands, awareness among Korean in Korea, growing popularity of including Avalon Organics, consumers by directly websites such as have rapidly gained in engaging them via relevant Strawberrynet.com suggest that popularity. Avalon Organics’ social media. Korean consumers have begun to products were originally look beyond department stores available on a few foreign 4.2.3. Beauty & Cosmetics to find better deals, as well as to websites, including iHerb, find foreign brands that are not More Koreans claim to have but are now easily found on available in Korea. major Korean online malls bought beauty and personal care as well as offline drugstores products online in the past year and department stores. than any other country (62%).35 Online sales of cosmetics reached GBP 110mn in 2015, representing Medicinal Beauty Products approximately 11% of all products European cosmetics that are now purchased directly from overseas easily found in local pharmacies that year.36 Moreover, Koreans were introduced to the Korean are increasingly purchasing market in early 2000s, first by at-home aesthetic devices such Korean dermatologists and later as sonic facial cleansers, high­ by various Korean buying agents tech massage rollers and laser based in Europe. European hair removal systems. Gmarket brands of cosmetics have been claims that sales of beauty popular in skin care with 21% of devices increased 23% in 2015 shoppers claiming their favourite compared to the previous year brands are French labels. Their and Auction saw sales of skincare mild ingredients and increasing and massage devices rise 394% brand awareness have a strong in 2015 over the year before.37 appeal to Korean consumers, and have experienced remarkable growth in the market. Bioderma, for example, has enjoyed a UK Trade & Investment 27

double-digit growth rate every brands have gained in popularity year since it entered the Korean largely due to creative online market. The company currently buzz marketing in Korea. uses both online and offline sales The barriers between channels in the Korean market. the different channels of CLOSER LOOK Medicinal cosmetic makers must distribution in the cosmetics Bulldog Skincare make sure, however, that all of industry will soon break (www.bulldogskincare.com) the ingredients in their products down due to the Korean is a manufacturer of men’s can be imported for personal use consumers’ ability to find the skin care products based in without additional certificates best quality brands regardless the UK. The brand entered (see section 6). Korea Customs of the channels of distribution. the Korean market in 2013 Services and UKTI South Korea Channels of distribution will through a partnership with can provide the latest information become more diversified to Olive Young, one of the most on the matter. include existing channels, such popular beauty drugstores as pharmacies, online malls, in Korea. The bulldog Good examples of other drug stores, TV home-shopping products are currently successful medicinal cosmetic channels, as well as new available on a number of brands in this category include: online channels such as social major e-Commerce websites • Bioderma (www.bioderma.com) networks and personal blogs. such as Gmarket, Auction • Uriage (www.uriage.com) and Coupang. But with retail • La Roche-Posay Representative – Bioderma Korea prices above the global (www.laroche-posay.com) average, many customers still turn to cross-border online shopping websites.

Men’s Care 4.2.4. Baby Products & Toys Korea’s male skincare market Baby products are heavily sought doubled in value from 2009 to after online. Nearly 10% of all 2014. The average Korean male e-imports consisted of baby uses 13 grooming products a products (about 6% from the F&B month and spends more on such and 4% from the baby products products than their counterparts and toys categories) in 2015 and in any other country. Korea 40% of all baby product sales accounts for 21% (GBP 390mn) completed in Korea in 2015 were of global spending in this entire made online, a figure that is industry.38 The trend started expected to grow even further. from basic skincare products,

such as face masks, but quickly spread to makeup products, such as tinted moisturisers. Recently introduced foreign men’s care 28 e-Exporting to Korea – A Guide for British Companies

Baby Food, Cosmetics Educational Toys and Clothes The toy market is led by Lego, Online shopping is particularly due to its educational value well developed in this category that Korean parents hold in Young mothers rule the in Korea with 79% of all nappies, high esteem, and local brands e-Commerce industry in Korea. 72% of all baby food and 58% featuring popular Korean cartoon They are always on the go. of all wet tissues bought online, characters such as Tobot or They do not have time to go representing the largest online Pororo. Global toy manufacturers 39 to a supermarket to buy baby shares of any product category. such as Hasbro or Mattel have a oil and diapers. They take The top e-imports in the baby combined market share of less out their smartphones and product category across multiple than 5 percent as Korean children cross-border e-commerce sites order diapers in bulk online. grow up with different, local in January 2016 included baby While doing so, they also fill in characters. Therefore, British toy formula, organic baby food the shopping cart with other makers could take advantage (jars, pouches), hypoallergenic things – food, snacks, clothes, of eexporting, especially if the bath products, feeding bottles etc. Almost all of our category product boasts educational and micro-fleece swaddles and buyers think of mothers in their appeal and is not linked to blankets. Imported powdered 20-30s first when building their characters that are unknown milk, in particular, has been product selections. gaining popularity among young in Korea. A good example of Korean mothers who are keen a successful e-exporter in to use foreign brands, such as this category is the US-based Baby & Kids Category Buyer – Aptamil and Holle, in the belief Learning Resources 11th Street that imported brands generally (www.learningresources.com). have better and safer ingredients. Parents these days are all In 2014 sales of powered milk about their children’s well­ purchased directly from German being and education. They e-commerce websites amounted want their children to have the to GBP 20mn, making it one highest quality care there is. of the major e-imports from They will order baby products Germany.40 and preschool educational items on foreign websites as CLOSER LOOK many parents are scared of dangerous knock-offs from Aptamil China. (www.aptaclub.co.uk/products) is a popular baby powdered milk product manufactured by Danone (Germany). Foreign-made baby formula, including Aptamil, first became popular in China, CEO – Gymboree Music & Play especially after a local product containing industrial chemicals Korea (Gymworld) killed six infants in 2008. Direct overseas purchases of baby powdered milk started to increase dramatically in Korea in early 2013. Aptamil products are available through a number of purchasing agents as well as on Ticket Monster. UK Trade & Investment 29

4.2.5. Home & Living pricing. While home and living To date, few online stores offer Korean households are known products are still not the most shipping options to Korea for for their discrepancy between popular in terms of cross-border home and living items and in high-tech home appliances, online shopping, many industry most cases Korean customers such as LCD screen-equipped insiders agree that they will need to use buying or shipping refrigerators and ultra-flat be the “next big thing” in the agents to make overseas UHD television sets, and low­ e-commerce space. purchases. Interest in this area is quality furniture, tableware and growing quickly, especially among kitchenware. The market was newlyweds in Korea. Popular dominated by local and Chinese items range from kitchenware manufacturers who dictated and small home appliances to design and pricing, but recently furniture and beddings. A number global brands, such as IKEA, H&M Koreans still do not have much of high-end products, such as Home and Zara Home, have set to choose from in terms of home kitchenware from Lenox (US) and up successful brick-and-mortar décor and furniture. IKEA Portmeirion (UK), are available stores in the country. is a blessing and is likely to in major department stores in The largest IKEA store in the stimulate the market. Koreans Korea but more and more people world opened in Korea in 2015 have been buying things from are purchasing these types of and has been a great success IKEA in the US using shipping products through cross-border to date. Costco recorded agents for years now, and e-commerce. record growth in tableware and they still are because IKEA in kitchenware sales in 2015, chiefly Korea is expensive. We need CLOSER LOOK amongst people in their 40s and more options, more fashionable According to Malltail, one of 50s. H&M and Zara, on the other brands to offer their products the most popular buying and hand, attract people in their 20s to consumers in an affordable shipping agents in Korea, and 30s with flagship stores way. We have this category direct orders of popular in trendy retail areas of Seoul. amongst our strategic growth products for newlyweds More and more products in this areas for 2016 and beyond.. (e.g. coffee machines, category appear on cross-border microwaves, kitchenware, e-commerce websites as well, etc.) increased 25% from Business Development Manager – August to September 2015 including Laura Ashley with its GS Retail due to the approaching special corner on 11th Street.41 peak wedding season. As The aforementioned brands European online retailers usually try to get rid of their also saw growth in sales of old inventories towards the bed spreads sheets, bathroom end of every year, they put linen (e.g. towels, etc.), and clearance markdowns on bedroom and bathroom clothing products starting from early (robes, pajamas, slippers, etc.). fall, which has attracted Consumers value attractive more consumers in Korea, modern design and affordable especially young couples. 30 e-Exporting to Korea – A Guide for British Companies

Currently overseas companies that deliver their products to CLOSER LOOK Korea include: Ruffwear

(www.ruffwear.com) is a • Bed, Bath & Beyond (US) manufacturer of premium (www.bedbathandbeyond.com) canine outdoor gear based

in the United States. The • Overstock (US) company entered the (www.overstock.com) Korean market in 2015 through a partnership Pet Products with Korean importer/ Another interesting opportunity distributor of camping and for British e-exporters is lifestyle products. Initially pet accessories. Koreans introduced to consumers have embraced the trend of through cross-border online humanising their pets – grooming shopping, Ruffwear products and dressing them up, fitting are currently available apartments with dedicated pet through various channels, amenities, etc. In fact, Korea’s pet including a flagship store industry grew 80% to GBP 1.16bn in Seoul, camping-related in 2015 from GBP 690mn in 2010. retailers and Galleria’s online This figure is expected to reach shopping mall. GBP 3.5bn by 2020.42 According to Auction, sales of pet products increased by 25% in 2015 compared to 2014. Pet furniture sales saw a growth rate of 129%, followed by pet shower and bath supplies (60%), grooming kits (33%) and perfume and hair dye products (36%).

Sales of pet strollers, in particular, have risen by 145% in 2015 compared to 2014.43 Pet strollers usually cost from GBP 58-116, but in the case of the British high­ end brand, Norton Pet, they can cost up to GBP 290. Norton’s pet stroller products were considered one of the most popular pet care products in 2015 and were featured on various open markets, including 11th Street and Auction. UK Trade & Investment 31 32 e-Exporting to Korea – A Guide for British Companies

Market Entry Strategies

Key Points 5.1. Market Entry Methods offer relatively niche products at low volumes, as it allows higher • e-Exporters can adjust the level Traditionally, retail businesses margins. It is also a flexible of resource needed to sell their looking to expand into new approach for those who offer products to Korean customers markets considered a few a hot product that fits with a standard routes which included current market trend. • e-Exporters can work alone setting up a local entity in or with local e-Commerce 5.1.1. Level 0: Using a Global the form of a wholly-owned companies e-Commerce Platform company or a joint venture with • Localised marketing and brand an established local partner, Placing your products on awareness are crucial – teaming licensing their brands to locally Amazon, eBay, Rakuten or up with local agencies or experienced master licensees or Alibaba, with shipping to Korea Internet personalities can be a franchisees, or working with a enabled, is arguably the most great way to spread a brand’s local distributor. These methods basic way to reach Korean message are still valid and indeed advisable consumers as an e-exporter. in many situations - relying solely Koreans are already familiar • The most successful strategy is on e-exporting may not work for with the websites and use them often multi-channel, exploiting everybody. However, e-exporting frequently. However, brand both online and offline is a good way for British brands awareness, brand exposure and opportunities to understand more about the brand visibility are likely to be Korean market and its consumers, low and, without a coordinated and build the foundation for a and localised marketing strategy, future multi-channel presence. sales to Korea are likely to be e-Exporting represents a great sporadic. opportunity for those brands that UK Trade & Investment 33

Key Advantages: CASE IN POINT • Cheap and available with a Sabrent currently existing shipping plan (www.sabrent.com) is a • Can receive free or cheap manufacturer of computer consulting from global couriers’ peripherals and accessories e-commerce teams based in the United States. The company uses a number • Eliminates most middlemen of e-commerce marketplaces • Easy to track and analyse sales to sell and promote its and related patterns by territory products, including Amazon, Overstock.com and BestBuy. Key Disadvantages: Key Advantages: Its 4-Port USB is one of • Lacks localisation, local the best selling products personality and local appeal • Cheap, low effort, easily in Amazon’s electronics • Product may not be noticed accessible category. Sabrent uses unless the customer knows what • Able to address multiple Amazon’s “Fulfilment by he or she is looking for markets under a trusted Amazon,” a service that lets marketplace brand name sellers store their products Things to Consider: in Amazon’s fulfilment • Multiple options for shipping Key Disadvantages: centres. Amazon takes care speed should be offered. • Not personal, not targeted at of packing, shipping and International customers, just specific consumers customer service. Many products bought by Koreans like domestic customers, exhibit • Not in Korean on Amazon follow this path. distinct preferences across the • Difficult to find products without price-versus-speed spectrum brand awareness and/or defined • Indicating delivery in estimated need 5.1.2. Level 1: Website with business days instead of a Things to Consider: Shipping Options to Korea specific date is a good way to avoid possible conflict with • Utilising the e-commerce For small businesses that already customers marketplace’s built-in tools operate an online store as a (usually paid) to promote part of their website, adding an • Note that Koreans celebrate products upon keyword search international shipping option different holidays to westerners is crucial at checkout is a good starting (e.g. Lunar New Year as opposed to Solar New Year), and these • Understanding the point. Global couriers such as should be factored in when marketplace’s fee structure DHL, UPS or FedEx offer special planning delivery schedules is important as it can vary e-commerce packages for small across sites and categories. It is and medium-sized businesses. recommended to have a good The delivery option offering sense of potential margins and should be versatile allowing the marketplace’s business customers to choose from model different price points relative to the speed of delivery, etc. 34 e-Exporting to Korea – A Guide for British Companies

• The language and layout of the 5.1.3. Level 2: updates when new products are website may be unfamiliar to Website Localisation released. It therefore requires sustained investment, rather some Korean customers. While Retailers that experience an than a one-time effort Koreans, especially younger increase in enquires or sales ones, can generally read English, from Korea may want to take • Displaying costs and prices in the customer’s currency is Korean is preferred. advantage by building a fully important to turn visitors into • Korean web design follows localised subsection of their customers as it builds trust in different rules and trends. e-commerce website. This is the seller and increases the Koreans are used to having a also a good option for those likelihood of conversion to sales huge amount of information and who already have good brand • Levels of localisation vary product pictures when shopping recognition in Korea and want from simply translating a few online to skip the previous, lower­ existing pages to tearing down engagement steps. Korean the website and building a new consumers will appreciate a shopping experience that fully shopping experience tailored reflects the local e-commerce to them and trust-building, culture. Translation should so crucial online, is more be done by a professional as CASE IN POINT effective when conducted in poor translation could create a Houseology the customer’s native tongue. negative impression (www.houseology.com) Localising a website may the is a UK-based premier most effective way to increase online interior design the customer base and to turn CASE IN POINT store, working on various accidental shoppers into repeat residential and hotel shoppers. ASOS projects across the world. It (www.asos.com) is a British offers international shipping Key Advantages: online fashion and beauty to over 80 countries, • Increased localisation, local retailer that sells over including Korea. There is personality and local appeal 850 brands as well as its own range of clothing and no standard shipping price • Increased ease of use for accessories. ASOS ships to as it depends on the size Korean customers and a better more than 237 countries, and weight of the boxes but shopping experience including Korea, from its the price is automatically • Increased likelihood of repeat central distribution centre calculated at checkout when purchases in the UK. Although not the address is entered. fully localised to support Key Disadvantages: The company also accepts the Korean market, ASOS extended returns (within 35 • Requires time and investment offers a few pages translated days of receipt) for a refund • Requires professional into Korean, where it shows but shipping costs and other translation and regular updates how to navigate the website duties and taxes are not along with its company Things to Consider: refunded. introduction • Localised websites require regular reviews as well as UK Trade & Investment 35

5.1.4. Level 3: Dedicated • Ideally, support should be Customer Support available 24/7, but failing that lines should be operational from Korean customers are used to a 9am to 6pm, in the Korean time very high standard of customer zone (UTC+09:00 in winter, support and good customer UTC+08:00 in summer) support can be crucial in • Dialogue with customers e-commerce as a trust-building may help design better tool. Websites that, on top of marketing tools such as events, having a localised Korean version, promotions, discount codes etc., have dedicated support in Korean which can help drive more sales (email, phone, chatroom, etc.), • International returns policy excel at retaining their customer should be clearly visible. Korean base and are more likely to enjoy customers expect to be able to the effects of free word-of-mouth return or exchange unwanted or marketing. faulty products hassle-free Key Advantages: • High localisation, local CASE IN POINT personality and local appeal Strawberry Net • Improves the customer (www.strawberrynet.com) experience and customer based in Hong Kong, is one retention of the largest online beauty CASE IN POINT retailers, stocking over • Direct dialogue with customers 30,000 products. With its YOOX allows for more targeted fully localised website, the (www.yoox.com) is an improvement over time company provides a free Italian online retailer of a Key Disadvantages: shipping service to over 200 wide variety of products, countries worldwide. The ranging from clothing • Can be costly – requires company offers country- and accessories to living dedicated staff with native-level specific promotions and and dining products. The Korean services. It has partnered company ships to over with major Korean credit Things to Consider: 100 countries worldwide and debit card companies, but offers only one • Dedicated support should be allowing Korean consumers shipping option for Korean of a high quality which means multiple payment options customers, which is the conducted by native or fluent without charging additional Korean language speakers who fees. Strawberry Net also express service with a flat are familiar with the Korean offers first-time shoppers fee of GBP 18. Its website market, always very polite and refunds on all duty fees is designed to fully support focused on resolving issues with and taxes they may have Korean customers while little fuss incurred upon entry to providing local customer Korea. service lines. 36 e-Exporting to Korea – A Guide for British Companies

5.1.5. Level H: The Hybrid The key challenge is that since foreign retailers can deal with Companies like Gmarket, 11th e-exporters are operating this issue. A retailer can either Street and Auction have an within a Korean website for sign an exclusive deal with the option for foreign retailers Korean customers,they must e-commerce company itself based outside of Korea to be able to function in Korean. resulting in it becoming the de open seller accounts without a Customers will ask questions facto agent or sign a local agent Korean corporate registration before purchasing that may be that manages import procedures, number. The procedure requires crucial in their decision-making, product certification, open submitting certain documents and will maintain a dialogue market storefront, etc. post-purchase by leaving reviews and the Open Market Review Key Advantages: Teams reserve the right to reject and comments. There will also • Selling under a well-established candidates. While it is possible be instances of complaints and e-commerce brand with high to organise this in English, the refund/exchange requests. penetration rates online storefront’s interface, Without local language support product descriptions, terms the model is unsustainable. • Access to e-commerce and conditions and customer Another challenge of this model company’s marketing, local service should be in Korean. is payment. For instance, on customer support and The open market staff offers Gmarket customers pay via a distribution network minimal support but the ongoing domestic online payment system • Support in handling of operation, page and product or bank transfer to Gmarket’s formalities (e.g. import updates, dealing with customers, “virtual account”, which Gmarket procedures, Korean labelling, etc. is handled by the seller. then transfers to the seller. Credit delivery, etc.) card payments are not currently available. There are two ways

CLOSER LOOK To become a Global Seller on Gmarket and Auction a non-Korean merchant should submit: • Business registration certificate • Bank statement • Photocopy of identification document (passport preferred) • Seller registration form • Seller confirmation letter Documents will be reviewed within 3-7 days. If the decision is positive, one can start uploading products on the website. The platform will help handle payments via bank transfer to the seller. The platform will take commission which is negotiated with each vendor separately. UK Trade & Investment 37

Key Disadvantages: 5.1.6. Level 4: Multi-channel • Field for creative sales • Requires initial investment in A multi-channel approach that techniques and marketing business development activities utilises both offline and online (showrooming, webrooming, (e.g. meetings with agent/ shopping channels can still be etc.) partner, product testing, market the most effective strategy for • Local market expertise and research, etc.) those looking for sustained support from the partner • Splitting of the sales margin growth in the Korean market. Key Disadvantages: with the local agent/partner (for With new technologies such • Can be costly and time e-commerce, typically 10-20% of as m-commerce and mobile consuming sales) payments, augmented reality, QR • Requires careful planning and • Suitable for relatively well­ codes, Internet of Things, etc., careful selection of the right known brands with high sales savvy retailers are finding new partner volume potential ways to make online and offline work together. Things to Consider: CASE IN POINT This strategy requires a local • An experienced partner that can presence in the form of a commit to developing a brand’s Macy’s and 11th Street carefully selected and dedicated presence in the local market is (http://shop.11st.co.kr/ partner with market expertise key. UK brands may be tempted koreasjworld). NYC’s famous and technical knowledge. to work with large retail groups, Macy’s Department Store The partner would typically but smaller distributors can be a has a small corner on 11th handle product importation, better fit Street’s Global Shopping certification and labelling, as well • Large retail groups are fierce subsection though which as marketing, B2B sales to offline competitors, siding with one shoppers can order items retail channels (hypermarkets, often eliminates the possibility to be shipped to them department stores, pharmacies, of working with another, limiting from the US. The online etc.) and partnerships with local market reach. Small distributors storefront is operated by SJ e-commerce platforms (Gmarket, can often work with multiple Company, a Korean agent. 11th Street, Coupang, etc.). The groups SJ Company is responsible brand can in turn focus on parallel for relaying product orders • UK brands should make sure e-exports to Korea via its global to Macy’s from 11th Street that the agreement with the website or global e-marketplaces. and handles payments and local partner is not restrictive local customer support. Key Advantages: in the sense that it does not stipulate that the brand cannot Macy’s ships the product • Often the most comprehensive e-export to Korea using its own to the buyer directly upon and universal method, suitable channels receiving funds from SJ for most retailers and brands Company which takes a • Full localisation including commission fee. customer support • Full market coverage 38 e-Exporting to Korea – A Guide for British Companies

• Brands need to think of creative 5.2. Marketing To make the creative media ways to make online and offline content (e.g. website banners, work together. Some examples All of the aforementioned mobile website ads, etc.) more include offering digital coupons e-export strategies will benefit relevant and relatable, it is that can be redeemed in a greatly from a dedicated advised that it be in Korean. brick-and-mortar store, and free marketing mix for the Korean According to local marketing delivery/discount code vouchers market, the elements of which specialists, the most relevant offered upon physical purchase should be familiar to all retailers. advertising channels for Korean to input during the customer’s Their effectiveness and cost Internet shoppers include next online purchase. will vary. It should be noted that desktop web ads, YouTube ads Korean consumers value stories (although Google search is not behind brands they choose. The popular, video consumption on CASE IN POINT brand’s origin, its mythos, its YouTube is strong), mobile web Cath Kidston founder/CEO – all these factors ads, mobile app ads and Facebook (www.cathkidstonkorea. can positively influence brand ads. Marketers should also make co.kr): Cath Kidston entered perceptions and story-driven sure that their ads appear on the Korean market through marketing messaging is very local-language websites that are a partnership with a Korean effective, through whichever relevant and benign to the brand importer/agent, Starluxe medium it is delivered. Here (contextual targeting). (www.starluxe.co.kr), in 2011. are some of the most common The products are currently marketing strategies used by CASE IN POINT found in 22 stores and online e-exporters that sell to Korea. Optimum Nutrition shopping malls in Korea, all 5.2.1. Level 1: Adding Korea to (www.optiumumnutrition. of which are managed by Current Digital Media Plan com) is an American health the Korean distributor. The and dietary supplement online shopping mall offers In order to increase Korean brand for athletes and free shipping for orders over consumers’ exposure to a new fitness aficionados. It uses GBP 29. brand, exporters should consider expanding their current digital Korea-focused contextual marketing plans to include Korea targeting on YouTube and as a target territory. Marketers certain Korean fitness must remember that search websites to increase brand engine optimisation should be awareness while promoting optimised for the Korean search sales through their online engines, Naver and Daum, which sales partners, iHerb and are very strong in the market. BodyBuilding.com. The company became the most recognised health nutrition brand in Korea and subsequently began to work offline with Costco Korea. UK Trade & Investment 39

marketing campaigns. This is Figure 6: Search Engine Market in Korea CASE IN POINT the most appropriate strategy 90 Daniel Wellington for retailers fully committed to 80 (www.danielwellington.com) the market or those willing to invest more heavily in exploiting 70 is a Swedish/British brand of watches and accessories. the market. Local agencies know 60 In 2015 the company ran Korean consumers well and 50 a successful social media so are well placed to execute campaign whereby it the most effective campaigns 40 encouraged Instagram users to position a brand in the local 30 to posts pictures sporting market. its watches with branded 20 Some creative agencies in hashtags. Some celebrity 10 Korea specialise in working with Instagrammers were given retailers from Europe. These 0 watches for free so that % Naver Daum Google Zum Bing include: Percent they could snap a picture • Asiance (www.asiance.com): Source: Digital Insight Today (2015) and post it to their followers. The campaign spread to Works with fashion brands such as Calvin Klein, Gucci, 5.2.2. Level 2: Social Media Korea and was featured cosmetic brands including Nivea and Local Internet Personality on popular accounts with and L’Oréal, F&B brands such Sponsorships pictures of everything from cats to fashion models and as Danone, and e-commerce Retailers can use Korean social designers. companies such as Rakuten media (e.g. set up localised • Innored (www.innored.co.kr): Facebook fan page or KakaoStory Works with Ticket Monster, page) to build brand awareness sponsorships (e.g. free samples, Northface, Reebok, M&Ms, etc. and influence word-of-mouth. merchandise, etc.) in exchange • Dmajor (www.dmajor.kr): Works This in turn should result in more for mentions and “shout-outs” on with Guinness, Smithwick’s, search queries for the product in their own social media channels. Estée Lauder, Burger King, etc. question. The localised fan pages This is a very effective and should be active in order to be relatively inexpensive tactic. effective. Live dialogue is crucial and so this approach requires 5.2.3. Level 3: Using Local staff with excellent Korean Digital Media Agency language ability, at least part­ For those that want to develop a time. marketing strategy fully tailored for the Korean market, it might be Another way to use social best to work with a local agency. media without hiring Korean­ A local specialist team should speaking staff is to get in allow a brand to better exploit touch with local bloggers and local digital/social media, local Internet personalities to offer search engines and traditional 40 e-Exporting to Korea – A Guide for British Companies

Logistics and Customs

Key Points 6.1. Logistics CASE IN POINT Global shipping companies • All global couriers offer shipping that offer special services for BodyBuilding.com options to Korea, some also e-exporters include Royal Mail, uses DHL e-Commerce provide consulting services DHL and FedEx. e-Exporters platform for its deliveries • Products valued below GBP 104 can contact their respective to Korea out of warehouses can be shipped to Korea duty e-commerce teams and learn in the US and the UK. DHL free, and are customs-cleared more about the services offered. offers a live delivery fee within a couple of days based on Such services include consulting calculator at the checkout Manifest Clearance and handling, but also website page that blends with the design elements such as a website’s overall design. • Products valued between GBP delivery fee calculator to be BodyBuilding.com offers 104 and GBP 1,380 go through integrated on the checkout two delivery options via a Simplified Clearance that page. e-Exporters usually work DHL: Economy, with a USD includes extra tax paid by with a global shipping company. 50 basic fee, a 4-9 business customer and takes 2-9 days In certain cases (e.g. Standard day delivery time including local delivery by DHL Korea • Products valued between GBP Clearance), one may need to and full tracking, and Super 1,380 and GBP 4,695 go through use customs agents as well, Saver, with a USD 15 basic Standard Clearance, which can but those are often hired or fee, an 8-20 day delivery take upwards of 7 days and is recommended by global shipping time with local courier handled by professional customs companies. Most global couriers delivery and limited tracking. agents have preferred local delivery companies that they work with and will internally deal with the handover to the local partner. The top local couriers are Korea Post, CJ Express, Hanjin, Hyundai Logistics Company and Logen. The couriers will also be able to provide detailed information regarding potential restrictions such as forbidden substances. UK Trade & Investment 41

6.2. Customs testing, labelling, etc., as long as the customer is importing the CASE IN POINT DISCLAIMER product for his or her own use. The Korean government is In order to benefit from tariff continuously working on reductions under the Korea- Shipments valued at above GBP making the e-commerce EU FTA, goods need to be 4,695 require the exporter to regulatory environment accompanied by a self-issued have an Approved Exporter easier for both vendors and Certificate of Origin (C/O). customers. It is therefore status in order to benefit from For goods with a value of less likely that the regulations tariff-free trade. Only 74% of than EUR 6,000 (GBP 4,695), presented in this report will British exporters eligible for exporters can self-issue the improve further over time. the Approved Exporter status British retailers considering C/O. The C/O should be written have applied since the FTA was e-Exporting to Korea should on the invoice, delivery note signed in 2011, while others contact the Korean Customs and/or other commercial Service for the latest updates or still pay tariffs that are easily documents and state: ask the UKTI team in Korea. avoidable. British exporters should contact the UKTI or HMRC “The exporter of the products Under the Korea-EU FTA, if the to get professional support in the covered by this document shipment value is below GBP process of becoming an Approved (Customs Authorization No.) 104, the consumer pays no Exporter. Note that some product declares that, except when customs duties or value added categories are still subject to otherwise clearly indicated, tax and the products should tariffs. these products are of pass through customs within a preferential origin.” couple of business days. Products valued up to GBP 4,695 can For goods exceeding EUR be imported from the UK by 6,000 (GBP 4,695), only Koreans for personal use with companies with Approved reduced paperwork. At the same Exporter status are eligible to time, e-exporters can also skip self-issue the C/O. Interested a lot of formalities required of companies should contact the traditional exporters, such as UKTI or HMRC for more details product registration, safety on becoming an Approved Exporter. 42 e-Exporting to Korea – A Guide for British Companies

The Korea Customs Service sets “items available for the manifest the quantity criteria under which clearance” can be processed CASE IN POINT they recognise the imported within one business day. For Items not available for items as for individuals’ use and this, KCS only requires that manifest clearance not for commercial purposes. For the package has an invoice or Items that are excluded from instance: manifest attached containing a importation through the list of contents, the weight and manifest clearance: • 6 bottles of vitamin value, and contact details of • Medical products, supplements are the maximum the sender and the consignee. herbal medicines, most import allowance at one time by Certain products are technically agricultural products, one individual not eligible for this process but, health supplements, in reality, as long as the product • For alcohols, one bottle of less processed foods, is valued below GBP 104, and the than 1L is the duty free limit but functional cosmetics exporter makes sure that there is the item is still subject to the especially those with proper information attached on liquor tax and education tax skin care effect (e.g. the invoice, there should be no regardless of price. Once the anti-acne, anti-aging, issues. price goes over GBP 104 or the etc.), volume exceeds 1L, customs placenta-based beauty duties and value added tax will Figure 7: Manifest Clearance products, steroids be applied In some of these cases, the Arrival definitions customs officials • For perfumes: 1 bottle of less apply can be ambiguous. than 60ml and below the value X-Ray inspection To prevent being subject to of GBP 104 unwrapping and inspection Open box inspection of the package, some If the products are ordered by (if needed) and purchased for individuals, exporters list a product’s full names on the invoice.

there are three types of Invoice check days business 1-2 clearance for e-commerce B2C For instance, in the case of transactions: Manifest Clearance, Release health supplements, instead Rapid Entry/Simplified Clearance of listing them as “health and Standard Clearance. supplements”, exporters put full names (e.g. “Optimum 1. Manifest Clearance Nutrition PRE” – pre­ Products valued below GBP workout formula). 104 (GBP 138 for packages from the US) and listed by the Korea Customs Service (KCS) as UK Trade & Investment 43

2. Rapid Entry / Simplified 3. Standard Clearance Clearance CASE IN POINT If a product is valued at over Most packages with a value Additional import tax for GBP 1,380 or not applicable for between GBP 104 and GBP individual use the Manifest Clearance or the 1,380 can be processed based The simplified tax rate is Rapid Entry, it will be subject to on a simplified duty rate. The equal to product value times a standard clearance with full customer will have to pay an average tax. The average documentation and details to additional tax before he or she tax is about 20% but some be reported to customs. In this can receive the order. The KCS items can be charged at case, a professional customs different percentages. For will calculate the tax to be paid, agent would be involved in the instance, general clothes contact the customer to inform procedure that can take weeks or and shoes are subject to them and release the product months if not handled carefully. 25% tax, fashion items only after receipt of the funds. made of leather are subject Global couriers such as DHL or Rapid Entry / Simplified Customs to 30% and the average FedEx have in-house customs Clearance usually takes two to tax on perfumes is 35% agents or can providereferrals nine business days. plus additional inland taxes. and so e-exporters who plan e-Exporters should state to sell such products should seek consultation from a global Figure 8: Rapid Entry / Simplified Clearance clearly that customers may be subject to such additional courier. taxes as certain items

Arrival including perfumes can be Figure 9: Standard Clearance subject to additional inland X-Ray inspection taxes such as special excise tax. Arrival Open box inspection X-Ray inspection

Simplified Clearance Open box inspection Application (fax/online)

Tax collection days business 2-9 Formal Import Declaration: from buyer - Import Declaration - Value Declaration Release - Invoice Check days business 7+ - Other Documents

Tax collection from buyer

Release 44 A UKTI South Korea Report May 2016

1 MOTIE, Trading Economics 23 ChinaSearch International 2 OECD Employment Outlook 2015 24 News BTC 3 Population Reference Bureau 2015 25 Statista 4 eMarketer 26 Export.gov 5 eMarketer 27 Korea Customs Service 6 eMarketer 28 Hyundai Research Institute, December 2015 7 Nielsen KoreanClick 29 Korea Customs Service 8 Techcrunch 30 MK News, Maeil Kyeongjae 9 CNET 31 MBN News 10 The Economist 32 Macromill Embrain 11 Ministry of Trade, Industry and Energy 33 Nielsen Global Connected Commerce Report 2016 12 Park, Lee & Kim (2014) 34 FashionOne 13 Kim, Yang & Kim (2013) 35 Nielsen Global Connected 14 Joongang Daily Commerce Report 2016 15 Nielsen Global Connected 36 Korea Customs Service Commerce Report 2016 37 Korea Herald, Feb 11 2016 16 KOSIS 38 Euromonitor (via The Economist) 17 Akamia SOTI Report, Q3 2015 39 Kantar Worldpanel, Accelerating 18 eMarketer the Growth of e-Commerce in 19 Criteo, cEommerce Industry FMCG 2015 Outlook 2016 40 Korea Customs Service 20 Wall Street Journal 41 11th Street 21 Nielsen Global Connected 42 Korea Herald, June 12 2015 Commerce Report 2016 43 Joongang Daily 22 World Consumer, CrediCards.com For further Information For further Information on on this report, the Korean the findings of this report market and to join UK Trade or how Intralink can assist & Investment South Korea’s UK companies in South e-Exporting programme Korea and globally contact: contact: Michal Waszkiewicz UKTI South Korea Project Manager, Intralink Korea [email protected] [email protected] gov.uk/ukti

UKTI UK Trade & Investment is the Government Department that helps UK-based companies succeed in the global economy. We also help overseas companies bring their high-quality investment to the UK’ s dynamic economy, acknowledged as Europe’ s best place from which to succeed in global business.

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Published May 2016 by UK Trade & Investment URN 16/0331 APKOR