[Big Tech, Big Change] Food and Fashion 'Online' Nest... Naver and Kakao Even Collaborate

Naver and Kakao's 'Food and Dining E-commerce Strengthening Strategy'... Busy Food Industry's 'Online Renovation'
Moves to Strengthen Fashion Direct Malls and Successive Openings of Luxury Official Malls... 'Strategic Collaboration' with ICT Platforms

[Asia Economy Reporter Lee Seon-ae] The food and fashion industries are striving to differentiate their own online malls to attract consumers amid a sense of crisis that they could lose the entire market to Naver and Kakao, which have emerged as powerful leaders in e-commerce. At the same time, they are not hesitating to engage in 'cooperation with the enemy' by pursuing strategic collaborations with Naver and Kakao.

◆'Everyone Wants to Be the No.1 Food Mall'... Strengthening Products and Delivery = On the 22nd, the food industry is focusing on enhancing the competitiveness of their online malls. Anticipating that Naver and Kakao will implement e-commerce strengthening strategies related to food, dining, and grocery shopping in the future, they have early on begun revamping their online malls. They are showing active movements such as launching specialized online brands as well as offering dawn delivery services.

Dongwon F&B is focusing on delivery services to strengthen the capabilities of 'Dongwon Mall,' launched in 2007. Currently, through the 'Band Fresh Service,' products ordered by 5 p.m. the previous day are delivered by 7 a.m. the next day, enhancing service satisfaction. Dongwon Mall is the number one food-specialized online shopping mall in Korea, with an annual order volume reaching 800,000 as of 2019. It sells about 120,000 products ranging from 1,000 types of food items to household and kitchen goods, beauty products, home appliances, and baby and children’s products from large marts like Costco. Starting from an annual transaction amount of about 200 million KRW in 2007, it has shown an average growth rate of 55% over 12 years. Dongwon Mall is focusing on dawn delivery services with a goal of achieving 100 billion KRW in transaction volume by 2021.

'The Banchan,' a home meal replacement (HMR) specialized online mall operated by Dongwon Home Food, is also concentrating on delivery services by expanding dawn delivery in the metropolitan area from five days a week to six days. Customers can order food over the weekend by 6 a.m. Sunday and receive it at their doorstep early Monday morning, allowing them to start their Monday breakfast with the delivered meals. A Dongwon Home Food official explained, "Orders for The Banchan increase significantly at the beginning of the week and before weekends. By delivering on Mondays, we have improved production and delivery systems so that customers can manage their weekly meal plans more systematically."

Geumcheon Meat, Korea's largest online meat mall operated by Dongwon Home Food, is also putting its life on delivery services. Purchased products are delivered fresh nationwide through a next-day delivery system using refrigerated and frozen vehicles operated directly by staff. Delivery operates normally even on holidays and Saturdays, making it especially popular among business customers focusing on weekend operations. Geumcheon Meat has set a transaction target of 230 billion KRW for this year.

CJ CheilJedang’s HMR specialized mall 'CJ The Market' is targeting consumers by offering various content optimized for convenience and personalized services. To develop it as a 'food-specialized mall,' it is expanding its product portfolio. CJ The Market offers a wide range of products from CJ CheilJedang as well as fresh and seasonal foods like fruits and vegetables, and B2B (business-to-business) products that allow customers to purchase large quantities economically. As a leading company in the HMR market, it is also strengthening product curation services that propose menus and table settings tailored to customers’ food culture, lifestyle, and preferences.

Additionally, based on customer data analysis, CJ The Market plans to expand digital marketing by planning optimal product content, producing brand storytelling digital content, and offering various visual experiences. To maximize customer satisfaction, it will also focus on user interface (UI) and user experience (UX) so that customers can shop conveniently on CJ The Market.

A CJ CheilJedang official stated, "CJ The Market will continue to grow sustainably as a representative platform for customers’ food culture and lifestyle, responsible for Korea’s dining tables."

Daesang has set a strategy to expand its online shopping mall Jeongwon e-Shop and develop it into an integrated online shopping mall for the Daesang Group. It plans to strengthen product competitiveness within online channels by promoting its online-exclusive brand 'Jibeuro ON,' aiming to increase 'Jibeuro ON' sales to about 100 billion KRW within the next five years.

Hanguk Yakult operates the online mall 'HiFresh,' which has been renewed into an integrated platform where customers can order not only its own fermented dairy and HMR products but also products from other brands.

A food industry insider said, "Food companies are putting their lives on the line online," adding, "Since the growth of Naver and Kakao poses a threat, they are pushing various online mall strengthening strategies to avoid falling behind in competition and to survive the non-face-to-face trend."

Small-scale dining brands are choosing active collaboration instead of bearing the costs of building separate online malls. They accept Naver and Kakao as the largest e-commerce companies in Korea. As evidence, last year, the top transaction categories on KakaoTalk Gift were cafes at first place, bakeries second, and ice cream third. Chicken ranked fifth, family restaurants sixth, and pizza ninth. Although Kakao does not disclose the top brands and products by transaction volume, looking at Kakao’s best products, it is estimated that leading dining brands such as Starbucks, Paris Baguette, Baskin Robbins, and BBQ are also number one in gift-giving.

◆Prada Bags and Gucci Shoes "The Era of KakaoTalk Gifting"... Accelerating Strategic Collaboration= Fashion brands are actively pursuing strategic collaborations with Naver and Kakao.

The most notable platform is 'KakaoTalk Gift.' It features the ability to immediately purchase desired products within the gift tab of KakaoTalk messenger, which has about 45 million daily users. Gifts can be sent without knowing the recipient’s delivery address, and the recipient can directly change detailed options such as size or color, making it very popular among people in their 20s who seek practicality and convenience.

National Geographic Apparel entered KakaoTalk Gift in June last month, showcasing 116 new and best-selling products, and within a month ranked among the top five in the 'brand clothing' sales category.

High-end luxury fashion and accessory brands are also entering KakaoTalk Gift one after another. Prada bags priced around 1.8 million KRW and Gucci watches around 1.1 million KRW have topped the 'luxury gift' category, establishing luxury gifting on KakaoTalk as a trend. Chanel recently opened the first luxury brand specialty store within KakaoTalk Gift. This is Chanel’s first official entry into the Korean online mall market outside of department store online malls. Gucci operates its brand store directly in partnership with Naver. Unlike Chanel, which is limited to cosmetics, Gucci offers full-fledged products such as leather handbags, shoes, and clothing worth several million KRW.

Movements to open and strengthen online malls are also active. Shinsegae International plans to develop its online mall SI Village into a luxury platform. To build it as a luxury platform, it introduced five luxury brands in the first quarter alone this year. An SI Village official said, "It is rare for overseas brands to grant online distribution rights to domestic distributors, but many brands are entering the online mall due to SI Village’s premium strategy," adding, "We plan to strengthen the image of SI Village as a luxury platform that sells trusted luxury brands."

Hansome has also selected strengthening its online business as its top management agenda and is focusing company-wide efforts. While competitors consolidate their scattered online businesses, Hansome plans to strengthen the characteristics of its three operating online malls and pursue a segmented battle strategy. The online select shop EQL, launched at the end of last month, focuses on brand lineups. The H Fashion Mall is currently undergoing renewal work and plans to grow into a specialized imported fashion mall.

High-end luxury brands, which had avoided online malls due to concerns about image damage, have finally surrendered. Hermes and Cartier officially opened their Korean online malls last month. A luxury industry insider said, "Luxury brands that insisted on offline stores only, citing reasons such as maintaining service quality and premium image, are gradually establishing online bases," emphasizing, "The acceleration of the non-face-to-face (untact) trend and the active trading of luxury goods on platforms have created a sense of crisis that can no longer be ignored."