More and more Korean consumers are buying products from overseas directly through online shopping malls. According to the Korean Customs Service, e-commerce imports reached $1.54 billion in 2014, a 48% increase from the year before. Over 15.5 million purchases were made, and of those direct online purchases, the US market accounted for 73%. The statistics have been hitting record high every year since 2010, when the measure first began to be tracked.
The reason behind this exploding trend is straightforward: American suppliers offer better prices. For instance, a certain box of See’s Candies retails for $18.50 in the US, but the same product is 48,000 won in Korea, or about $43.50. Online shopping has made it much easier for Korean consumers to find the best deals by looking to foreign websites. According to a Korean survey in 2014, the most popular online purchasing retailers were Amazon (55.9%), followed by eBay (38.4%) and iHerb (36.8%), a vitamin and supplement site.
The market will continue to expand as Korean online shopping malls join the action. The number one online retailers, G-Market and Auction, both of which are Korean subsidiaries of eBay, have launched a service facilitating foreign purchasing. The service provides translation of product descriptions, takes responsibility for ordering and shipping, and completes customs declarations. Korean companies specializing in this direct purchasing business are growing more prosperous, accelerating the growth of the market.
The Korean government has already made reforms aligned with the new consumer trend. As of March 2014, of the Korean Customs Service has exempted tariffs on purchases up to $200 for 10 categories, including clothing, shoes, books, toys, and electronics. In addition, the office has lowered the threshold for “special customs declarations” for businesses, encouraging firms to provide cheaper goods and services to customers, thus addressing some of the causes for substantially higher prices through Korean retailers. The government expects the inflow of lower-priced foreign products to eventually stabilize the domestic price level. But as long as domestic prices remain higher than abroad, US online retailers can expect to see steady traffic from Korean consumers.
Cheolwoo Lee is an Asan Academy intern at the East-West Center in Washington.