Korea’s Online Imported Goods Marketplace

 

Source: pixabay

 

The Korean population is very tech savvy and logs one of the highest internet usage rates of any nation in the world. Korean consumers are thoroughly accustomed to online shopping – a move that began long before COVID-19 restrictions - and domestic transactions have largely shifted from brick-and-mortar shops to online platforms. Historically, imported goods in Korea have been quite pricey, as importers must try to recoup their sunk costs for import approvals, certifications, and maintaining inventory while also enjoying good profitability. This has led Korean consumers to become expert product hunters, carefully searching and monitoring the availability, specifications, and prices of desired items in overseas online marketplaces. Although direct purchases from overseas online platforms have been growing steadily for years, this trend received a huge boost from the COVID-19 pandemic. Restricted from travelling internationally, the resulting increased online comfort purchasing by a wider population with more time to browse has caused Direct Overseas Purchasing, or DOP, to become the fastest growing method for imported products.

 

Entering the Korean market through a traditional distributor involves multiple hurdles and often significant investment. An importer needs a number of approvals, and must handles costs related to providing local consumer services, promoting its business, and managing inventory. All these cost factors increase the domestic sale prices, yet consumers are highly cost sensitive. Often, even with international delivery and customs fees, consumers can purchase products at a lower cost when purchasing directly from overseas. Ironically, this can even apply to Samsung, LG and other products which are made in Korea.

 

Direct Overseas Purchasing (DOP)

 

When Korean consumers want something, nothing can stand in the way. DOP often facilitates purchase of products that are not available from official importers. Consumers simply purchase products directly online [from an official webpage of products from all over the world from platforms like Coupang and various individual overseas websites (such as gap.com and have it delivered to Korea. This is fully supported by a highly developed internet and advanced logistics infrastructure. A DOP vendor can also make use of a plethora of available payment methods. Strict domestic banking regulations mandate security protocols that make online credit card purchases somewhat cumbersome. In response to market demands, many private payment schemes (for example, Samsung Pay and Kakao Pay) have sprung up to fill the gap, offering 'one click' authorization services.

 

This opens the door for a low cost, low risk market entry environment for overseas exporter businesses to flourish in Korea. This Direct Overseas Purchase (DOP) market has created new opportunities for potential exporters, which we discuss more below. 

 

Social distancing restrictions in response to COVID 19 have made offline shopping less attractive, and at the same time have encouraged people to stay at home in their spare time rather than go to crowded theaters, restaurants or bars. This has freed up more time and budget for browsing the internet and looking for deals. Interestingly, not only has the overall online spending volume increased, but the value per product purchased has also increased.  

 

Direct Overseas Purchase Amount & Sectors

Units: KRW trillion

 

Source: 해외 직구 물품 유통 및 안전관리체계 개선방안(www.korea.kr)

The DOP Opportunity

 

The Korea market is not an easy market to penetrate due to its unique price sensitivity, high levels of competition and the need to keep up with its frequently dynamic changes in consumer trends. Unlike official imports with minimum order quantity MOQ and customs clearance issues, market entry via the DOP method virtually eliminates all Korean requirements and procedures.

 

Korean customers enjoy using global online platforms such as Amazon, iherb and AliExpress during promotion seasons like ‘Black Friday’ or ‘Singles Day.’ However, a number of Korean major shopping platforms are gaining in popularity due to Korean language, payment systems and easier delivery factors.   

 

 

DOP Customs

 

DOP customers must manage customs clearance themselves, but with the rapid growth in the DOP market, the system has become increasingly simple and effective.

 

1.    Simple Customs Clearance (List-clearance Customs)

 

Consumers purchasing products for personal use do not need to fill out a customs declaration or pay duties and surcharges, but need only input a personal consumer code, a unique number issued by Korea’s customs authority through a simple online registration process. This clearance process is generally easy, but there is an annual cost ceiling as well as limitations on the types of products that may be imported this way.

 

The total cost cap, which is calculated inclusive of the product price, delivery fee, and tax, is limited to USD 150. When purchasing from the U.S. the cap is USD 200. The list-clearance customs process requires only an invoice which must include the buyer’s signature, phone number and address, along with the product name, price and weight.

 

Notably, various medicines, medical devices, functional foods, foods and cosmetics are excluded from the Simple Customs Clearance.  Example of excluded products include the following:

 

a.    Medicines and medical supplies

A.    Hair growth solutions

B.    Aspirin

C.    Fever reducers

D.    Cold medicines

b.    Wild animal related products

A.    Animal leather products

B.    Endangered animals

c.    Agricultural and stockbreeding products, agro and livestock products

A.    Cat/dog food

B.    Ham Products

C.    Cheese products

D.    Cigarettes

E.    Coffee beans

F.      

d.    Products which violate trademarks or intellectual property rights

A.    Imitation bags, shoes, apparel

B.    Other imitation products

e.    Cosmetics

A.    Most cosmetics products

B.    Steroid-based cosmetic products

f.     Others

A.    Guns

B.    Swords

 

 

2.    General Entry Customs Clearance  

 

General entry customs clearance applies when the product is purchased for personal use and is not a product that is eligible for the simplified list-clearance customs system mentioned above. The product then must go through the full customs process with a personal consumer code and an import declaration.

 

It is important to note that when multiple products are purchased, if one item must undergo the general entry customs process, all other items in the same shipment will also be required to go through the general entry customs process.

 

DOP Related Services

 

Partnering with domestic companies that provide customized DOP services can provide an opportunity to effectively enter the Korean market, even without additional filings or corporate presence. There are a number of different business models within this sector. Companies that purchase luxury products on behalf of consumers may check the authenticity or quality of the products before repackaging and sending to consumers. Adding to the consumer appeal of this model, overseas online brands that market their products in Korea through an official importer will often refuse to ship directly to consumers in Korea. DOP companies, on the other hand, are able to purchase the products in another market and then send them onward to consumers in Korea.

 

Another model is through most major domestic online shopping malls, which are eager and able to cooperate with overseas brands within their platforms, due to the continued growth of the DOP market.

 

IRC Consulting is a Korea-focused business development consultancy that assists international organizations to identify and capitalize on the unique opportunities in this vibrant market. For more information on achieving success in the Korean market, contact IRC Consulting (https://www.ircconsultingkorea.com).  

 

contact@ircconsultingkorea.com  

IRC CONSULTING 

Suite 1705, Officia Building, 92, Saemunan-ro, Jongno-gu, Seoul, Republic of Korea 03186 

서울시 종로구 새문안로 92 광화문 오피시아빌딩, 1705호 Tel: +82-2-737-3222,  https://www.ircconsultingkorea.com

Stop the World, I Want to Get Off! (or) Dropping Out

 

Stop the World, I Want to Get Off! (or) Dropping Out

 

Source: pixabay

Tang ping or lying flat is a new phenomenon in China, a rebellious reaction by young people against the rat race.  Lie flat and take your punishment because the pressure, stress and struggle to succeed is overwhelming.  This would seem to contradict our stereotype of the Chinese.

 

The Japanese reaction to societal pressures is hikikomori which means pulling away or being confined.  The Japanese solution has been to simply withdraw from society and live the life of a hermit, even in the midst of crowded cities. 

 

Although the economy continues to grow and diversify, Korea is also experiencing a similar phenomenon called sampoja (삼포자) or three rejections (translated literally as 'people who reject three').  Many young adults in their 20s and 30s are rebelling against the pressure and expectations of society.  The three rejections are dating, marriage and children.  The social pressures are so great that it is not worth the effort; just give up. 

 

Korean society is highly competitive and the enormous social pressures have coined the phrase 'hell Joseon'.  Social expectations and dreams are pre-determined (and enforced by mothers.)  The ONLY career path for a 'successful' Korean involves a highly prescribed life plan.  Parents plan for years to get their kids into the right schools.  Schools are important so one can start to develop the highly important relationships that will enable you for the rest of your life.  Schools should not be confused with a place of learning. That is reserved for hakwons or night schools (often called cram schools) which are designed to help students achieve better grades and pass exams.  Math, language and English are essential, together with at least one 'artistic' endeavor such as music (violin or piano – it doesn't matter) ballet, or some other 'soft' skill that looks good on your resume.  Playing frivolously in an unstructured environment is a waste of time!  (When the Ministry of Education included 'jump rope' evaluation in the elementary school curriculum to give the academically weaker but physically stronger kids an 'equalizing' opportunity, jump rope hakwon sprang up immediately to teach the best way to get a high score on the jump rope test.)  A child's schedule is highly orchestrated to develop the 'right' background.

 

The 'cram' part expands when you are in middle school and need to prepare for the high school entrance exams.  Periodic attempts to reign in or ban the hakwon or even to curtail the hours to allow kids to arrive home before midnight have been thwarted. There are parents who drive more than an hour to send their kids to a famous hakwon. During the COVID-19 pandemic, the Ministry of Education closed all regular schools but the hakwon lobby and parental pressure were so strong that they kept operating unabated.

 

The process continues throughout high school, perhaps even more intensively. Furthermore, charity or social work has become a prerequisite for the 'correct' resume. Sport too is fanatical.  One elects to participate in a sport and practices intensively to be the stand-out player.  None of this includes taking football in the fall, basketball in the winter perhaps, and then baseball in the spring. You pick a sport, practice 12 months a year and compete to be the best. So too with hobbies.  "What is your hobby?" is one of the barrages of '20 questions' launched when you meet someone for the first time.  It is as if you are only allowed to 'enjoy' one activity.  And you had better be damn good at it!  After all, this is the country where an Olympian is ashamed for winning 'only' a silver or bronze medal.

 

Getting into university is the next hurdle.  Those years of 'cram schools' during high school are designed to get a high sooneung (수능) score (the national college entrance exam which takes place yearly) and deliver you to the right university.  There are only a half dozen prestigious universities in Korea with a limited number of openings so the vast majority of students are already failures at the age of 18 and each year after sooneung, there are tragic reports of students who take their own lives.

 

College years are the golden years.  You have 'made it'.  This is the time for serious relationship-building. Your university classmates will form your strongest network in your professional career.  One key activity is 'MT' or membership training, a cross between a fraternity initiation and getting blotto with your classmates (if there is a difference).  In the modern rat race world, even this opportunity to let down your hair and take it easy is under attack. Securing a good job has become so challenging that university students actually have to STUDY!  Sigh.

 

The next hurdle is the job market.  Having attended the right schools to matriculate from the right high school and university, the next step is getting the right job.  The top choices are at one of the chaebol – family controlled conglomerates such as Samsung, Hyundai, LG or SK.  A respectable fallback is getting a good government job or a position at one of the other ten or twenty 1.5 tier conglomerates. If you fail in the first round of recruitment exams, there are limited options. Many stay home and study hoping for a better result next year.  However, some companies only recruit university seniors so it is best to postpone graduation and remain enrolled as a senior. At some universities, the 'senior class' has twice as many students enrolled as those in earlier years.

 

If you are lucky enough to get a prestigious job, you become a part of a large machine. As a 'freshman' in a company, you are assigned all the menial jobs.  Starting salaries are barely enough to live on (you are probably still living at home with Mom anyway).  Hours are long.  Korea has recently imposed a maximum permitted 52-hour work week which simply means that if you need to work longer than that, those hours are unpaid.

 

The Dating Game starts in college and takes a more earnest turn after getting a job.  Your resume is in order.  You went to the right schools, graduated from an acceptable university and have secured a respectable job.  You are now in the cross hairs of the 'mother-in-law' mafia. The coffee shops of the five-star hotels are populated by women in their 50s conspiring to match-make the perfect couple. (This is serious business and there are professional matchmakers who link desperately seeking progenitors.)

Marriage means buying a house which is increasingly out of reach.  (Traditionally, the groom bought the house and the bride filled it with the latest appliances.)  Having children involves financing them through this rat race.  And when 'bride' becomes 'Mom', the cycle starts all over again.  Increasingly, young people opt not to marry and many who do marry decide not to have children (or one at most).  Stop, it's too much; I want out!  Reject dating, reject marriage and reject having kids!  In 2020, 42% of Koreans in their 30s remained unmarried.  Sampoja!

 

The 'three rejections' have become five. The house is too expensive so scratch that.  The good job is also elusive so give up on that. Five now becomes seven. Now that one is so clearly a 'loser', a relationship is the next to go.  Who needs hobbies where you demonstrate your prowess in a chosen discipline?  Without friends, there is no reason to keep up your appearance.  Finally, there is nothing to live for so no need to invest in your health.  The three rejections have now trebled to nine.

 

Many people interpret this phenomenon as 'doom and gloom'.  Politicians wail about the dismal outlook for the country.  Financial subsidies are given to child-bearing families.  Certainly, there are tremendous social pressures and traditional culture is under attack.  However, Korea has a capacity for rapid change.  The country and people have 're-invented' themselves before.  The Korea of today is vastly different from the Korea of a generation ago or the generation before that.  The positive side of the three rejections (or five or seven or nine) is that young people will start to listen to their own heart.  After rejecting social norms, one is free to pursue one's own dreams.  This phenomenon is already apparent.  The thirtysomething man who abandoned his job at a leading securities firm to start his own bakery.  The chaebol scion who 'opted out' to be a photographer and open his own coffee shop.  The businessman who refused to send his son to a hakwon because he never studied.

 

This is driving dramatic changes in Korean culture.  We have already discussed in a previous post the idea of 'honsul' or drinking alone and there is also its cousin 'honbap', eating alone.  Even in groups, it is now the exception rather than the norm that one person orders for all.  That most individualistic of all drinks, the cocktail, is seeping into bars.  Young Koreans are at a crossroads and their desire to fulfil their own dreams will likely drive them towards a future unlike the sampoja or the old ways of their parents and grandparents.

 

Do you know how changes to Korean culture are influencing your business?  Are there new opportunities arising in the Korean market you need to know about??  IRC has been supporting Western organizations to identify and capitalize on opportunities in Korea across four decades.  Companies seeking to expand into this market or established firms seeking new opportunities can tap IRC's experience and expertise to improve their business here.  Achieve your ambitious targets in Korea; ask IRC to guide your way.

 

 

contact@ircconsultingkorea.com  

IRC CONSULTING 

Suite 1705, Officia Building, 92, Saemunan-ro, Jongno-gu, Seoul, Republic of Korea 03186 

서울시 종로구 새문안로 92 광화문 오피시아빌딩, 1705호 Tel: +82-2-737-3222,  https://www.ircconsultingkorea.com