Future remains hazy as to how the joint venture will shake up the e-commerce market, market analysts say

Shinsegae Department Store in Myeong-dong on Thursday. (Yonhap)
Shinsegae Department Store in Myeong-dong on Thursday. (Yonhap)

Shinsegae Group's announcement on Thursday of its planned joint venture with Alibaba International, aimed at amplifying their presence in both the Korean and global online retail markets, has yet to spark much optimism about its potential impact.

Starting next year, Shinsegae and Alibaba will merge their e-commerce platforms, Gmarket and AliExpress Korea, under a 50-50 joint venture, while maintaining separate operations. The new e-commerce unit is expected to be valued at approximately $4 billion, according to industry sources.

“It is still unclear what specific synergies the venture will bring,” said Kim Myung-joo, an analyst at Korea Investment & Securities, in a report Friday.

Stating that the deal's immediate impact appears limited, Kim pointed out that the combined market share of both companies is estimated at only 8 to 9 percent, a level unlikely to change in the coming year.

The nation's leading e-commerce giant is Coupang, which topped the country's e-commerce market with a 24.5 percent share, according to 2022 data from the Korea Fair Trade Commission. As of November, Coupang leads with 32.2 million monthly active users, as per WiseApp Retail Goods, followed by AliExpress with 9.67 million MAUs. Gmarket ranked fifth with 5.62 million MAUs.

“It is important to pay attention to whether the two companies extend their partnership beyond online markets,” Kim added, acknowledging that securing a strategic partner could be a positive move for Gmarket, which has lacked a clear strategic edge.

According to Lee Jin-hyup, an analyst at Hanwha Investment & Securities, a potential setback could stem from negative consumer sentiment toward Chinese capital, with concerns such as the leakage of personal information to China.

The deal could, however, mark a new breakthrough for Gmarket, Lee explained, which has accumulated over 100 billion won ($68 million) in operating losses since Shinsegae Group’s E-mart acquired an 80 percent stake from eBay in 2021.

Investor uncertainty surrounding the joint venture was also reflected in a drop in E-Mart's share price, with shares falling 9 percent to 68,900 won as of 10 a.m. Friday, down from the opening price of 76,000 won.

Despite the bumpy road ahead, the Korean e-commerce firm expressed confidence in the strategic alliance's potential.

Gmarket CEO Chung Hyung-kwon, who led Alibaba's Korean operations before joining Gmarket in July, pledged to expand the company's presence in both domestic and international markets.

"We will grow into a leading player in the domestic e-commerce landscape, leveraging Gmarket's high product reliability and service system, along with Alibaba's competitive products in terms of prices," CEO Chung said in a corporate notice Thursday. “We will also establish a firm foothold for domestic sellers to enter global markets,” CEO Chung added.