KOREA’S MULTI-BIL­LION DOL­LAR HABIT

NADA YOUNG AND SANG WOO PARK RE­PORT ON THE RIS­ING AD­DIC­TION TO ON­LINE SHOP­PING IN SOUTH KOREA’S FOOD AND BEV­ER­AGE SEC­TOR.

NZ Business - - CONTENTS - BY KEVIN KEVANY

Nada Young and Sang Woo Park re­port on the ris­ing ad­dic­tion to on­line shop­ping in South Korea’s F& B sec­tor.

S outh Korea (Korea) is home of the world’s fastest In­ter­net. The av­er­age speed in Korea at the time of writ­ing this ar­ti­cle is 26.7 mbps. New Zealand is a dis­tant 9.3 mbps (source: Fast­meter­ics www.fast­met­rics.com). The South Korean penin­sula is also one of the most densely pop­u­lated places on earth with 211 peo­ple per square kilo­me­tre, ac­cord­ing to the World Bank 2016 study.

By com­par­i­son, New Zealand’s pop­u­la­tion den­sity was a roomy 18 peo­ple per square kilo­me­tres.

With a to­tal pop­u­la­tion of 51.25 mil­lion peo­ple, Korea is one of the Four Asian Tigers (South Korea, Tai­wan, Sin­ga­pore and Hong Kong) and the fifth largest econ­omy in Asia.

It is New Zealand’s sixth largest ex­port mar­ket and, for­tu­nately for ex­porters, the New Zealand – Korea Free Trade Agree­ment en­tered into force in De­cem­ber 2015 – with­out it, tar­iffs on many of our com­mon ex­port goods would be as high as 40 per­cent.

Korea’s high pop­u­la­tion den­sity and light­ning-fast In­ter­net cre­ate the per­fect con­di­tions for a multi-bil­lion dol­lar e-com­merce sec­tor.

In 2017 Korea's on­line shop­ping move­ment reached 78 tril­lion won (US$71.7 bil­lion) and is ex­pected to ex­ceed 80 tril­lion won (US$73.6 bil­lion) this year, ac­cord­ing to statis­tics re­leased by the Na­tional Sta­tis­ti­cal Of­fice on 2 De­cem­ber 2017.

Mo­bile-based on­line trans­ac­tions ac­counted for 61 per­cent of the to­tal on­line mar­ket. Food and bev­er­age (F& B) on­line sales saw some of the big­gest in­crease with a mas­sive 38 per­cent rise to 9,751.1 bil­lion won (US$8.9 mil­lion), out­pac­ing con­sumer elec­tron­ics (at 8,912.3 bil­lion won, 24.3 per­cent).

Thanks to the im­ple­men­ta­tion of ad­vanced tech­nolo­gies such as retina recog­ni­tion, fin­ger­print de­tec­tion, cy­ber money, ‘Big Data’ anal­y­sis and ar­ti­fi­cial in­tel­li­gence (AI) the on­line con­sumer experience is so­phis­ti­cated and uniquely tai­lored to suit the in­di­vid­ual shopper.

This user-friendly shop­ping en­vi­ron­ment, com­bined with prices up to 40 per­cent lower than off­line and the con­ve­nience of home de­liv­ery, has prac­ti­cally rev­o­lu­tionised Korea’s gro­cery sec­tor.

The num­ber of sin­gle and dual in­come house­holds has risen rapidly in re­cent years and these ur­ban pro­fes­sion­als are all about con­ve­nience. Pur­chas­ing gro­ceries on­line and hav­ing them de­liv­ered to the door at a time that suits has be­come the new nor­mal in Korea.

These con­di­tions have also given rise to a thriv­ing Meal Kit mar­ket. Home Meal Re­place­ments (HMR) are an im­por­tant cat­e­gory in the F&B sec­tor in Korea, but it's the Meal Kit mar­ket within this cat­e­gory that is cur­rently cap­tur­ing peo­ple’s at­ten­tion.

A Meal Kit is a nicely branded pack­age of in­gre­di­ents com­plete with easy to fol­low cook­ing in­struc­tions. There are Meal Kits for every­thing from tra­di­tional Korean dishes to Ital­ian-style pasta and even Mex­i­can-style tacos.

Food gi­ants such as Dong­won, GS Re­tail and Yakult Korea have al­ready en­tered this mar­ket. Many oth­ers are fol­low­ing.

The beauty of Meal Kits is that they do not take away the joy of cook­ing. A per­fect meal is ready in about ten to 15 min­utes. There’s no waste, no need for ex­tra in­gre­di­ents and the Meal Kit is de­liv­ered right to the door in the same way that you might or­der a pizza.

ON­LINE MALLS

As the shift to on­line shop­ping con­tin­ues many of the ma­jor F& B com­pa­nies in Korea have es­tab­lished their own on­line ‘shop­ping malls’. The move al­lows them to break free from the cut-throat con­di­tions of phys­i­cal re­tail while en­hanc­ing prof­itabil­ity and en­abling bet­ter con­trol of their brand.

CJ, one of the lead­ing F& B man­u­fac­tur­ers in Korea, is ag­gres­sively pro­mot­ing it’s on­line store, ONMART, which has ex­hib­ited dou­ble-digit growth every year since it launched. Un­like other on­line stores, over 90 per­cent of ONMART sales are gen­er­ated by CJ brands.

F& B gi­ant, Dong­won, also has a thriv­ing on­line busi­ness. Their site sells its own brands, of which there are many, along­side prod­ucts from COSTCO.

With­out an in-house e-com­merce plat­form and de­liv­ery ser­vice COSTCO makes use of Dong­won on­line to en­able con­sumers to pur­chase COSTCO goods to­gether with Dong­won’s prod­ucts and have them de­liv­ered to the door.

Deasang of­fers over 100 brands in its on­line shop­ping mall. With en­tic­ing pro­mo­tional tac­tics such as dis­count coupons and a huge se­lec­tion of goods, sales have seen triple-digit growth in re­cent years.

In a bid to cap­ture a niche mar­ket, Deasang re­cently launched an ‘air­port de­liv­ery ser­vice’.

For Kore­ans that sim­ply can’t live with­out their beloved Korean food, Dae­sang of­fers an ar­ray of F& B prod­ucts that are ap­pro­pri­ately pack­aged for long flights with­out the risk of leak­age or break­age. The com­pany op­er­ates a col­lec­tion desk at the air­port so con­sumers can pur­chase on­line be­fore they fly and pick up their goods when they reach the air­port.

Korea’s on­line shop­ping ad­dic­tion has be­come a multi-bil­lion dol­lar habit that is show­ing no signs of slow­ing down. NADA YOUNG IS THE DI­REC­TOR, AND SANG WOO PARK THE KOREA COUN­TRY MAN­AGER, OF IN­CITE. VISIT WWW. EXPORTINCITE.COM

NADA YOUNG

SANG WOO PARK

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