News / South Korea fears growing impact of Chinese e-commerce players

Photo: © Alexey Novikov

South Korea’s Fair Trade Commission is investigating the rapid growth of Chinese e-commerce giant AliExpress, following a record number of consumer complaints.

In 2023, the Korea Consumer Agency received 475 complaints about AliExpress’s compliance with rules on refunds, returns and storage of customer data – triple the number of complaints in 2022, and in January this year alone, 212 new complaints were reported.

The investigation is a warning shot across the surging growth of Chinese e-commerce platforms, with reports  that domestic investigations into Temu and Xiyin are also expected.

Unlike AliExpress, these platforms lack a physical presence in South Korea, but their impact on their domestic market has been notable – Xu Yongqiu, professor of business at Shuming Women’s University, reportedly described Temu’s model as “lethal” to domestic business.

That model depends on access to cheap labour, “ultra-low” shipping costs and favourable import rules for goods valued less than $150 – all contrary to regulations for South Korean operators – and Temu’s sales platform has been available to South Korean shoppers since last July.

For South Korean SMEs, the influx of Chinese e-commerce traffic has been marked, a report from the Small and Medium-sized Ventures Department notes the number of domestic SME start-ups fell 0.5% year on year in 2023, following 13.4% growth in 2022 and +11.6% in 2021 – the decline directly attributed to Chinese e-commerce expansion.

South Korea’s Ministry of Trade, Industry and Energy reportedly met with domestic retailers to discuss the emergence of the Chinese platforms, but expectations are that with healthy financial firepower behind them, they will strengthen their logistics infrastructure.

And with China’s domestic market floundering, this is not surprising; indeed, AliExpress and parent Alibaba have set their sights on substantive regional growth.

Just yesterday, Alibaba announced a sizeable, $1.1bn, investment into its South Korean venture over the next three years, with $200m of this set aside for a 180,000 sq metre logistics centre.

And perhaps seeking to placate concerns, reports from South Korea’s Yonhap News Agency noted that Alibaba also intends to support 50,000 local SMEs export their goods.