September 10, 2017

E-commerce seeks better profits with mobile shopping

The Korea Herald

E-commerce firms are seeking strategies such as linking up with artificial intelligence and exclusive products to increase profitability, as consumers continue to shift their shopping tendencies to mobile platforms. 

According to numbers from Statistics Korea, in July mobile shopping transactions reached over 4 trillion won ($3.53 billion) for the first time, rising 35.1 percent on-year. Mobile shopping made up 62 percent of all online shopping.

The rise in sales transactions has not been accompanied by increased profitability. Aside from eBay Korea, which operates market leaders Gmarket and Auction, Korean e-commerce firms have been struggling with low margins.

“Right now, the competitiveness of e-commerce companies in Korea largely relies on cheap and fast delivery, which is quite costly,” said an official with one e-commerce company. “This is not sustainable.”

Despite continued losses, companies are hesitant to let go of their e-commerce businesses as consumers continue to shift to mobile. A notable case is that of SK Telecom, which was rumored to be planning on splitting off its e-commerce platform 11st run by SK Planet and seeking investment from other retailers.

Recently, however, SK Telecom CEO Park Jung-ho denied those rumors at a board meeting, saying the company has “no plans” to sell a controlling stake in 11st.

“Technologies such as artificial intelligence, the Internet of Things and big data are completely changing patterns of consumption,” Park said. 

“Through 11st, we will explore various ways to lead the e-commerce of the future.”

Industry watchers speculate that Park’s statements are an indication that investment talks with retail giant Lotte have fallen through. It has been reported that 11st had previously held talks with retail group Shinsegae as well.

While SK Telecom is contemplating ways to increase 11st’s competitiveness by incorporating the telecom company’s artificial intelligence capabilities, eBay Korea has teamed up with telecom carrier KT to cooperate in joint marketing and business utilizing KT‘s AI device GiGa Genie. 

Meanwhile, e-commerce firm Coupang, which acquired a wide consumer base with its next-day Rocket Delivery service, recently launched a new private brand called Tamsa. 

“Tamsa’s products are developed based on big data accumulated from reviews on existing products,” said an official with Coupang. 

By creating products that are based on customer reviews, Tamsa hopes to bring consumers into Coupang with its own products in addition to its delivery services. eBay Korea also recently signed an agreement with furniture maker Fursys to provide exclusive promotions and to develop exclusive furniture products for eBay‘s platforms.