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Social commerce set for major showdown

Global giant Groupon joins Korea’s growing social commerce market


A major showdown is expected in Korea’s social commerce market with the introduction of global giant Groupon next week.

The U.S.-based social commerce firm announced Monday that it will launch its branch here next Monday, going head-to-head with the country’s industry leaders like Ticket Monster and Coupang.

Recruiting about 200-300 employees mostly in their 20s and 30s, Groupon Korea ― led by three chief executives ― will target consumers in one of the world’s most wired countries.

Social commerce is a type of cyber commerce that uses social media outlets to allow social interaction over the purchase of new products and services on the Internet.

The industry has been rapidly expanding in Korea, with some experts estimating that the market will record an average annual growth rate of 49 percent.

“The mobile commerce market (a past trend) was stagnant due to the high costs of mobile data usage, however, the market swelled in the form of social commerce with the rising popularity of smartphones,” said Lee Sun-mi, a researcher at DigiEco, KT’s economic research unit.

Groupon, which has been leading the global social commerce market, sells deal-of-the-day items ― offering a discount of up to 50 percent ― in about 500 cities in 44 nations. The company has already started in other Northeast Asian countries such as Japan and China since opening its business in Chicago in November 2008.
The Groupon website is displayed on a computer monitor. (Bloomberg)
The Groupon website is displayed on a computer monitor. (Bloomberg)

Groupon Korea is most likely to feature its first deal-of-the-day item in its official launching press conference on March 14.

It has already organized a pre-launch event on its website, offering 1,000 won of Groupon cash to e-mail subscribers, adding a condition that the subscriber figure must exceed 50,000 before next Monday.

This reflects the company’s frequently-used strategy which only gives big discounts if its requested number of participants has been reached. Local social commerce site operators, including Ticket Monster and Coupon, also use similar strategies.

Industry sources, as well as experts, claim the arrival of the global giant will inevitably spice up competition in the already hyped-up local market. They, however, also say it may increase the size of the market as a whole.

“We’re actually responding positively to the change,” said an official representing Ticket Monster. “It may become an opportunity to enhance the service quality and the market size with the entrance of a global player which is an early mover in a global sense.”

The official agreed that regional competition will be beefed-up but said social commerce firms would gain more influence here.

The official added that Ticket Monster’s 8-month prior experience in the Korean market will give the company the upper hand in making future deals with its partners and presenting attractive deals to people.

Ticket Monster, the country’s top social commerce firm, has recently recorded a total of 40 billion won ($35.78 million) in accumulated sales and increased its staff from five to 200 since the company opened in May last year.

The company takes an average of 20 percent commission of total sales from its partners.

Lee of DigiEco said the local launch of Groupon may provide a good business model for the local firms to reach out overseas.

“The market could further expand here with the entrance of global operators since it will indicate that the local firms could also go beyond the local boundary and branch out to other countries,” she said.

Lee also said there is a high possibility that a large number of merger and acquisitions take place in Korea for there are more than 100 players in the industry.

As an exemplary case, Whencoupon ― a social commerce site designed for people in the Cheonan and Asan regions ― was acquired by Groupon earlier this month.

“I believe smaller firms will be regrouped with the bigger companies but I don’t think it will be easy for Groupon to dominate the Korean market as of now,” she said.

By Cho Ji-hyun (sharon@heraldcorp.com)
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