South Korea e-commerce market report 2022

South Korea is one of the countries with the most developed e-commerce market in the world. The International Monetary Fund predicts that by 2026 , the size of South Korea's e-commerce market may lead the Japanese market by about 12% . In the "2019 Ease of Doing Business List " previously released by the World Bank, South Korea ranked fifth among the 189 countries on the list , while the United States ranked sixth and the United Kingdom ranked eighth. During the epidemic control period, the economy was shut down and physical stores were closed. Those who were forced to change their consumption habits tried the " freshness " of online shopping , especially older consumers, which drove South Korea's already high Internet penetration rate to a record high.

South Korea 's GDP forecast for 2022 is $ 190.8 billion, and will rise to $ 2.316 trillion by 2027. South Korea's current total population is about 51.7 million, but due to low birth rates, longer life expectancy and a shortage of foreign workers, the total population is on a downward trend and may fall off a cliff by 2070 .

(Year-on-year change trend of GDP in the current year calculated at the price level of the current year , unit: billion US dollars)

(Year-by-year change trend of South Korea's population, unit: million)

In 2020 , South Korea's Internet penetration rate was 97% . Solid economic foundations and strong economic recovery policies have helped South Korea escape the global economic downturn caused by the epidemic. According to data from the Bank of Korea, South Korea's economic growth rate in 2021 was 4.1% , the highest in 11 years, higher than the previous forecast of 4% . However, the Composite Consumer Confidence Index ( CCSI ) in June 2022 - a measure of consumers' optimism about economic performance - was 96.4 , down 6.2% from May .

(Internet penetration rate changes year by year)

Overview of Korean e-commerce market

South Korea is the world's sixth largest e-commerce market, with an estimated revenue of $ 118 billion in 2022 , second only to China, the United States, Japan, Germany and the United Kingdom. With the deepening of economic globalization, disputes between Russia and Ukraine and other local regions have gradually spread to South Korea. Against the backdrop of further lengthening of the supply chain cycle and a sharp increase in commodity prices under high inflation, the Korean local market has begun a journey of " moving forward with a heavy burden " .

( E-commerce revenue of various countries in 2022 , unit: billion US dollars)

Online retail sales in South Korea account for 32% of total retail sales , second only to China ( 46% ) and the United Kingdom ( 36% ). Countries with developed e-commerce industries such as Indonesia ( 20% ) and the United States ( 16% ) are far behind South Korea.

( The proportion of online retail sales in total retail sales in various countries in 2022 )

By category, fashion products account for the bulk of South Korea's e-commerce market revenue, with an estimated revenue of US$ 41 billion in 2025 , followed by electronics ( $ 27 billion), beauty & health & personal care & home care ( $ 19 billion), and toys & hobbies & DIY ( $ 17 billion).

(The labels on the left from top to bottom are Food, Beverages, Media, Furniture, Toys & Hobbies & DIY, Beauty & Health & Personal Care & Home Care, Electronics, Fashion)

( Average spending of Korean consumers on online shopping in various categories from 2017 to 2025 , with forecasts from 2023 onwards, in US dollars)

Prospects of the Korean e-commerce market

South Korea's e-commerce revenue is expected to maintain an annual growth of 4% in the next few years , while the global forecast revenue growth is 10% during the same period , and will increase by 12% in 2025. South Korea's online shopping ratio is expected to remain relatively stable at 39% in 2025 , higher than 37% in 2022 .

(2018-2025 Korean online shopping income change trend)

( Statistics and forecasts of Korean consumers’ online and offline shopping preferences from 2017 to 2025 )

Analysts predict that the e-commerce market in East Asia and Southeast Asia will still have room to grow as the middle class expands and online shopping habits continue after the epidemic. South Koreans' demand for food and beverage products is the primary contributor to the rapid growth of local e-commerce. It is expected that the e-commerce revenue of food and beverage will exceed US$ 20 billion by 2025 , and the market penetration rate will reach 25% and 26% , respectively, higher than this year's 21% and 23% .

Nowadays, looking around the world, there is no country whose people are not burdened by rising prices. In South Korea, where the e-commerce market is highly developed and " involuted " , people have indeed enjoyed benefits through online shopping, which is also the key reason behind the continuous increase in e-commerce penetration rate year after year.

( Sales share of various products in department store channels in 2021. The labels on the left are luxury goods, home products, food, children, fashion accessories and others, women's formal wear, women's casual wear, etc. from top to bottom )

Focus on Korean local market trends

Luxury goods market is booming

Under the media's packaging and promotion, the high-end luxury goods market has gradually become popular in South Korea. In 2022 , the luxury goods market revenue is expected to reach US$ 6.39 billion, and is expected to maintain an annual growth rate of 4.83% by 2027. South Korea has a relatively high disposable income, which means that most people can afford luxury goods. In 2020 , Koreans aged 60 and above had the highest single luxury goods consumption of all age groups, averaging about 413,154 won.

The rise of celibacy

Since 2017 , the term " honjok " has gradually become popular in South Korea, which refers to the fact that more and more people choose to make a living alone. The rise of this idea has further exacerbated the problem of an aging population. In 2020 , the proportion of single-person households in South Korea reached 31.7% , a record high. The main composition of the single group is over 20 years old and over 40 years old. Most of these people love to spend money and are willing to spend money.

· The culture of eating alone is prevalent

A survey conducted by Rakuten Insight in 2021 showed that among the Koreans surveyed who used food delivery apps to place orders, 45% spent 20,000 to 30,000 won at a time , and 38% spent 10,000 to 20,000 won .

Brand overseas expansion

Korean cosmetics such as Innisfree and Sulwhasoo, as well as the world-famous electronic products of Samsung and LG , have laid a good foundation for Korean brands to go abroad. The deepening of economic globalization has made cross-border shopping, or overseas shopping, gradually flourish. The advantage of overseas shopping is that you can buy your favorite foreign products at a relatively low price, but the cost is that you need to pay high shipping costs. According to the International Trade Association, South Korea's cross-border trade volume will increase from US$ 2 billion in 2017 to US$ 4.5 billion in 2022 .

For a long time, language barriers, limited delivery methods and long delivery routes have been the main obstacles for overseas consumers to purchase Korean products. In order to eliminate this obstacle, many retailers have begun to provide direct mail and foreign language customer service consultation services, but foreign language services are mostly limited to English and Chinese.

(The left picture shows the source of network traffic for the 100 largest retailers in South Korea. South Korean consumers account for the vast majority, while Chinese and American consumers account for 12.4% and 8.5% respectively ; the right picture shows the development of cross-border e-commerce in Asian countries in 2021 , with South Korea ranking second only to China)

Earlier this year, Lotte Duty Free launched its first e-commerce platform for overseas countries such as Singapore, Malaysia, Thailand, the United States, Japan and China, with products mainly from South Korea. Consumers in these regions can qualify for free shipping if the settlement amount exceeds US $ 70 ; Shilla Duty Free has teamed up with Alibaba's Cainiao to provide point-to-point logistics services; in April 2022 , SSG.com announced the launch of cross-border services for fashion, beauty and food categories ... It can be seen that South Korean e-commerce platforms are ambitious to expand outward.

Settlement habits

In 2021 , South Korea is one of the countries with the highest credit card penetration rate in the Asia-Pacific region, but other more convenient payment methods are catching up, including Kakao Pay .

( Changes in the proportion of different settlement methods for online shopping from 2017 to 2025. The labels on the left are electronic receipts, direct payment, other, cash on delivery, e-wallets, bank transfers, and credit or debit cards from top to bottom)

Kakao Pay is a mobile payment platform under Kakao Group . It became popular in South Korea in a short period of time thanks to Kakao Talk, an APP similar to WeChat . Consumer platforms that currently support Kakao Pay settlement include Apple Store , Google Play , Netflix and Spotify , etc. According to the forecast of analysis agencies, the number of Kakao Pay users will continue to grow by millions in the next few years.

Data shows that mobile consumption accounted for 72% of South Korea’s total online shopping transactions in 2021 .

When asked why they use apps to shop, 74% of respondents said they “urgently need an item” and 41% said they “felt like it”.

In the past three months (the statistical time is the three months before the questions were asked), respondents aged 20-49 who had used Naver Shopping, Coupang, and Gmarket accounted for 63%, 60%, and 25%, respectively.

Consumer distribution

South Korea's e-commerce penetration rate is high, expected to be 77% in 2022 and 83% in 2025. There will be about 40 million online shoppers in South Korea in 2022, and it is expected to grow to 43 million by 2025. In 2021, users aged 45-54 accounted for 25%, ranking first among all age groups. Surprisingly, the 18-24 age group accounted for the smallest proportion, only 12%.

South Korea is currently one of the countries with the highest per capita plastic consumption in the world. It can be seen that young people pay more attention to environmental protection and deliberately reduce the use of disposable products compared with the older generation. A survey by the Korea Chamber of Commerce and Industry showed that about 65% of Korean millennials and Generation Z consumers are more willing to bear the economic burden rather than moral condemnation.

In terms of gender, the male-female ratio among online shoppers is 50/50; taking economic income as the entry point, the distribution of low, medium and high-income groups is similar, with no obvious differences.

As for the reasons for online shopping, 44% and 33% of the respondents chose "good quality and low price" and "convenience" respectively, while only a very small number chose service and reliability.

Beauty & health & personal care and home care still account for the largest proportion, followed by beverages and electronic products.

(User penetration rate of each category from 2017 to 2025)

( Changes in the number of online shoppers in each category in South Korea from 2017 to 2025 , unit: million people)

· platform

In September 2021 , Coupang had about 6.27 million visitors , ranking first among major e-commerce platforms in South Korea. Gmarket followed closely behind with 6.2 million visitors .

Coupang was founded in 2010 and achieved sales revenue of 203,600 won in 2021. The Korea Times recently reported that Coupang has nearly 10 million paying members, surpassing Shinsegae's 6 million. According to Export2Asia , 70% of Koreans live within a 10- minute drive of Coupang's logistics center . Coupang's logistics capacity, especially the last-mile delivery capability, is almost at the " ceiling " level in Korea.

Although Coupang 's main target is domestic users in South Korea, it has now expanded to international markets including Singapore, Japan and Taiwan, and its global expansion plans are still ongoing.

( Visits to major e-commerce websites in South Korea in September 2021, unit : million )

Changes in consumption habits before and after the epidemic

RetailX research shows that before the pandemic, 45% of respondents aged 16 to 24 shopped both online and in-store for non-grocery products , with an equal preference for online shopping ( 28% ) or in-store shopping ( 27% ). Similar trends can be seen in slightly older age groups, with 47 % of respondents aged 25 to 34 and 46% of respondents aged 35 to 44 choosing a mixed shopping model; 33% of respondents aged 55 and above said they preferred to shop in-store before the pandemic, with only 20% of consumers in this age group choosing online shopping. Among all age groups surveyed, the proportion of those choosing mixed shopping was basically the same, accounting for 45% or more.

When asked whether the epidemic has had an impact on their shopping habits, 10% of respondents aged 16 to 24 said they still insist on shopping in physical stores, while 43% of respondents said they have switched from shopping in physical stores to online shopping only, and 47% of respondents prefer a mixed shopping mode.

A similar trend can be seen in the 25 to 34 -year-old group, with only 8% of respondents insisting on shopping in physical stores, 44% switching from physical stores to online shopping, and 49% choosing mixed shopping. Respondents aged 35 to 44 also showed similar preferences.

The change was most pronounced in older age groups, with 57% of respondents aged 45 to 54 saying they shopped both in-store and online. This rose to 63% in the 55 and older age group . This suggests that most of those who were deeply affected by the epidemic and changed their shopping habits were middle-aged and elderly people.

(Figure 1)

(Survey results on consumption channel preferences of various age groups before and after the epidemic. The data before the epidemic is shown in Figure 1)

Source: Japan and South Korea Observatory