Korean wave and the power of ‘PM sent’
BOys over Flowers. Crash Landing on you. BTS. surely, you must have heard of at least one of these, or even all of them. You are probably even an OG K-drama or K-pop fan since the Korean wave first hit the Philippines in the early 2000s. However, for many Filipinos, what used to simply be an interest has become a source of alternative income during the pandemic.
The Covid-19 pandemic has truly shaken the fabric of our society. It has required institutions to adjust massively to continue operating amid all the uncertainty. However, business cycle fluctuations mean that it is usually smaller players who lose out more than larger corporations due to having less resources. Business closures due to strict lockdowns mean many people losing jobs and experiencing transient poverty.
At the peak of the first ECQ implementation in April 2020, unemployment rate rose to 17.7 percent, with 7.3 million Filipinos unemployed. Because life goes on for these millions of Filipinos, many resorted to online selling, which helped them augment their household income, though it required some initial but manageable capital. Out of the many items sold in online markets, one category stood out very much in 2020. Because many people had much time in their hands, they binge-watched K-dramas, resulting in a spike in demand for Korean food products and other related merchandise.
What used to be seen mostly in Korean-owned grocery marts are now being offered in the virtual markets. What I notice in social-media groups for these items is how many suppliers do not post the prices of their products, but would instead simply post a photo, a short description, and an occasional “Limited Stocks Only.” Multiple comments would flood such posts asking how much (“HM?”) to which the seller would reply with the classic: “PM sent.”
As the consumer, you probably find this annoying. I myself sell Korean goods and still find this cumbersome. After all, the transaction could be made much simplerbypostingtheproduct’sprice,thereby eliminating the unnecessary conversation that might delay the closing of the transaction. So, why do many online sellers do this, despite the DTI clearly advising that prices should be posted always?
In my 1.5 years of selling these products, I have observed Korean food items to exhibit characteristics of monopolistic competition. Barriers to entry and exit are minimal. Products are a bit differentiated. There are many market players, and firms have little market power. Given this reality, producers or sellers who belong to this type of market would try to gain leverage by capitalizing on imperfect consumer knowledge, and even deliberately keeping information asymmetry to gain more sales and profit.
For instance, among the popular products currently sold in online Korean markets are honey citron and ginger tea. For a 1-kilogram jar, the acceptable retail price ranges between P330 and P400, with the latter being quite steep already. This already considers a profit margin of about 15 to 20 percent, as well as varying wholesale prices for different brands like Feliz, Cholocwon, and Ottogi.
However, many online sellers are aware of the high demand for this product during flu season and are capitalizing on people’s bounded rationality by pegging retail prices much higher (P475 to P500) so they could reap exorbitant profits from each bottle, since most people will not even bother to extensively PM many sellers to ask for the price and compare them, though it is the rational thing to do. It is a hassle, and, afraid of missing out, many consumers do not take the time to screen due to time constraints and scarce supplies.
Sure, it is a short-term win, but this is no way to keep customers coming back. Once customers come across postings of the same product at much cheaper prices, they will resent the ones who sold items to them at scalper-like rates. Indeed, keeping a safe but consistent profit margin is a slow game, but revenue is almost always assured because satisfied customers will return with more referrals, and word of mouth is one of the best marketing strategies.
At the end of the day, we understand how many people want to make a quick buck by trying to milk short-term huge profits. Life is hard, after all. Nevertheless, in a market with little power given to sellers, it might be best to be a tad more patient with lower prices that still allow one to maximize profit. This is through finding suppliers who offer competitive prices that are cost-efficient. This way, people will not have to resort to “PM sent” to gain leverage. Instead, they gain market advantage through affordable products.