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Online retail giant Amazon steps up Korean penetration

Arrival of global industry leader poses challenge to Korean retailers

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Published : 2014-01-20 19:44
Updated : 2014-01-20 19:44

Amazon’s giant warehouse in the U.K. (Bloomberg)

With a new chief aboard, Amazon, the world’s largest online retailer, is set out to enter the Korean market in full scale by the end of the year.

The online retail giant’s arrival is expected to cause a stir as domestic marketers claim it would kill off Korean commerce companies already suffering from extreme competition.

Amazon Webservice Korea, Amazon’s Korean branch office in charge of the cloud business service, recently appointed former Google Korea chief Yeom Dong-hoon as general manager of Korea. The headquarters has started recruiting engineers, local sales and customer managers. AWS has been in operation since 2012 with powerhouse clients including Samsung Electronics. 
Yeom Dong-hoon, the newly appointed general manager of Amazon’s Korean bureau.
(Korea Herald File)

The move is seen as an attempt at market expansion because the job opening includes positions for general market management. Speculation is growing that Amazon will jump into the local online commerce market to compete with G-Market, the country’s market leader run by American trade giant eBay, and Interpark, a local company that has had a strong footing in the Korean market since 1997, among others.

Apparently encouraged by the substantial number of Korean Internet users who already shop at Amazon.com, the American company is likely to target tech-savvy customers who understand that Korean companies tend to overprice imported goods.

According to the Korea Chamber of Commerce and Industry, 1 out of every 4 online shoppers purchase items from foreign websites. Statistics Korea noted that the total value of online shopping transactions in Korea marked 22.1 trillion won ($20.6 billion) in 2012. Of it, shopping on foreign websites made up nearly $800 million, according to a separate figure by the Korea Customs Service.

“The portion of shopping at foreign websites including Amazon.com has been increasing at a jaw-dropping speed, and Amazon is expected to target that section first,” an online market insider said.

Interpark Kim Dong-op, head of Interpark INT, last year said Amazon’s advance into the Korean market could put local commerce into a life-or-death situation. “If Amazon brings the whole business like it did in Japan, the Korean business-to-customer market will see a drastic change, whether it be the online or offline markets,” he said.

But whether Amazon will sweep the Korean online commerce industry is still unknown, given that the domestic market is regarded to be oversaturated by industry observers.

Some insiders say that Amazon will not directly enter the domestic market by establishing its warehouses and create a logistics network here. “Currently there are eBay, Interpark, 11street and others as well as social commerce businesses including Groupon, Ticket Monster and Coupang. We say the market is saturated,” an official of an online commerce company said.

Attracting more Korean shoppers to its American site sounds more feasible, he said. “Amazon could provide a Korean service, which is a small improvement, but will attract many more Koreans who found English service uncomfortable,” he added.

By Bae Ji-sook (baejisook@heraldcorp.com)

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