In South Korea, cross-border e-commerce sales into the country are rapidly increasing across product categories from home care to small appliances. This is due primarily to the growing popularity of Chinese-affiliated e-commerce marketplace platforms, which are winning adherents thanks to their offer of sometimes shockingly low prices. However, the surge in cross-border e-commerce sales is also prompting calls for regulation and a system that ensures consumer safety.
Chinese cross-border e-commerce sales are increasing rapidly due to low prices and improved delivery speeds
The market value of cross-border retail e-commerce increased by 26% in 2023 in constant terms (ie after stripping out the effects of inflation) to KRW8,548 billion, compared to KRW6,796 billion in 2022
Source: Euromonitor International
According to Statistics Korea, China makes up almost 50% of all cross-border e-commerce sales into South Korea, with sales more than doubling in 2023 compared to 2022. However, as cross-border e-commerce from China surges, concerns about safety and personal data breaches have also become more prominent.
In addition, Temu entered the South Korean market in July 2023 and is gaining users at an incredible speed, thanks to competitive pricing and a product assortment that spans categories from apparel to beauty and personal care to small appliances. Indeed, Temu’s parent company, PDD Holdings – which also operates the giant e-commerce marketplace, Pinduoduo, in China – established a local corporation, named Whaleco Inc Korea, in February 2024, cementing its entry into the South Korean market. By April 2024, the number of Temu users in South Korea exceeded eight million.
Calls for greater supervision of C-commerce platforms operating in South Korea are on the rise
While South Korean consumers are enjoying the extremely low prices that these C-commerce platforms offer, officially reported complaints to the Korea Consumer Agency related to uncertified websites and Chinese-affiliated shopping platforms such as AliExpress, Temu and Shein are also increasing rapidly. Reported complaints vary from delivery issues to the presence of toxic substances in purchased items to the widespread presence of counterfeit goods.
The number of complaints to the Korea Consumer Agency related to consumer electronics and consumer appliances increased by 36% from 859 cases in 2022 to 1,165 in 2023
Source: Korea Consumer Agency
On 16 May 2024, the South Korean government announced that, starting in June, it would ban cross-border e-commerce sales of 80 product categories, including children’s products, electrical and household goods that can pose potential fire risks, and household chemical products that include potentially harmful substances, unless items have received South Korea’s KC safety certification mark. However, the policy immediately faced strong criticism for imposing strict limitations on consumer choice. In response to the backlash, the government further explained on 19 May that the policy would only restrict the products where safety inspections have confirmed actual risks, and that it does not plan on imposing a complete ban on cross-border e-commerce.
Balancing safety and growth in cross-border e-commerce
South Korean consumers are highly welcoming of cross-border e-commerce. The market for cross-border e-commerce, including sales from China, is expected to continue growing. However, as the volume of cross-border e-commerce transactions increases, so do the associated issues. As a result, there is a growing consensus that government regulation of cross-border sales of electronics and items that contain potentially harmful chemicals is necessary.
In this crucial period, greater attention is being drawn to how the government will establish a system to ensure safety without overregulating C-commerce platforms. In the long term, it seems necessary to establish a mutual recognition system that could minimise unnecessary processes related to double certification between countries. This would benefit companies and consumers by ensuring product safety and reliability.
Read our article, Growth Opportunities for Consumer Appliances in Asia Pacific, for a deeper understanding of the consumer appliances market analysis in the region. To further explore consumer trends expected to impact e-commerce in Asia Pacific in 2024, read our article, 2024 Consumer Trends in Asia and the Impact on E-Commerce.