Starting April, Fulfillment Collaboration for Some Naver Products
Alliance with CJ Expected to Expand to All Products
Fast Delivery Possible... Anticipated Increase in Naver Shopping Market Share
[Asia Economy Reporter Jin-gyu Lee] As expectations for synergy between Naver and CJ grow, it appears that fulfillment has provided the starting point for the big deal between the two companies. Since the fulfillment collaboration began earlier this year, the two companies have gained mutual trust by experiencing significant synergy effects.
Fulfillment refers to a logistics integrated service where a logistics company takes consignment from a seller and handles all processes from delivery to storage, inventory management, and exchanges/refunds.
Since April, Naver has partnered with CJ Logistics to introduce a fulfillment service that delivers orders within 24 hours for some products. Through an all-around alliance with CJ, the fulfillment service, which was previously applied only to some Naver products, is expected to expand to all products.
Naver's distribution channel, 'Naver Shopping,' recorded an annual transaction volume of about 21 trillion KRW last year, and it is expected to achieve over 30 trillion KRW this year, an increase of more than 40%. In terms of annual transaction volume, it boasts the largest market share in Korea, surpassing Coupang (17.1 trillion KRW) and eBay Korea (17 trillion KRW), which operates Auction and Gmarket.
However, lacking its own logistics centers and delivery networks, Naver has been evaluated as somewhat less competitive in delivery compared to Coupang's 'Rocket Delivery,' which delivers products ordered by customers by the next dawn.
Therefore, it is analyzed that Naver decided to resolve this weakness through a strategic partnership with CJ. In the online shopping market where fast delivery is crucial, fulfillment centers are considered a core competitive advantage. Instead of building its own fulfillment centers, Naver chose to ally with a company that can cooperate in logistics. CJ Logistics completed a large-scale fulfillment center in Gonjiam, Gwangju-si, Gyeonggi-do, in 2018, investing 380 billion KRW. The center is the size of 16 soccer fields (115,700㎡). From Naver's perspective, the alliance with CJ allows active utilization of CJ Logistics' fulfillment center in its business.
This alliance also raises the possibility that CJ Logistics will take full charge of logistics for vendors registered on Naver's Smart Store. In the e-commerce industry, there is speculation that if CJ Logistics handles Naver's logistics, Naver Shopping's market share will increase even further.
Meanwhile, last month, Naver made a sole investment of 10 billion KRW in the fashion tech company 'Brandy.' This is in a similar context to the alliance with CJ. Founded in 2014, Brandy launched a fulfillment service that handles purchasing, packaging, delivery, and customer service for Dongdaemun fashion sellers. It is known that Naver decided to invest to support fast delivery through the Dongdaemun clothing wholesale and retail fulfillment system built by Brandy.
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