SK Group Discusses Investment Cooperation with Amazon and 11st
[Asia Economy Reporters Seulgina Jo, Hyesun Lim, Minyoung Cha] The reason why Amazon, the world's largest e-commerce company, chose SK Group as its ultra-cooperation partner for entering the Korean market lies in the strategic moves of SK Group Chairman Chey Tae-won, who is aiming to expand new businesses based on a 'platform.' In particular, there is an analysis that SK Telecom, the group's core affiliate that covers traditional telecommunications as well as new growth businesses such as content, media, and e-commerce, can maximize 'ultra-cooperation.'
Synergies Expected from E-commerce to Content and Telecommunications
On the 13th, a business insider commented on the investment cooperation discussions between SK Group and Amazon, saying, "The interests of Jeff Bezos, Amazon CEO, who has shown interest in the Korean market, and Chairman Chey of SK Group aligned perfectly," adding, "Starting with cooperation in the e-commerce market, the synergy between the two companies will fully materialize across vast areas including content and telecommunications."
At the center of this cooperation is SK Telecom. Based on the big data accumulated from its single subscriber base in the telecommunications business, the plan is to maximize competitiveness in the 4th Industrial Revolution by integrating platforms covering mobility, artificial intelligence (AI), big data, 5G mobile communications, and e-commerce.
At the SK Group level, it is reported that this ultra-cooperation was deemed essential for expanding SK Telecom’s business scope, which is expected to undergo group governance restructuring such as the introduction of an intermediate holding company. A business insider said, "Although it starts with e-commerce, it is expected that business cooperation will be possible in various fields in the future."
With SK Group joining forces with Amazon, the domestic e-commerce ecosystem centered on its affiliate 11st is expected to undergo rapid changes. As the demand for overseas direct purchases by domestic consumers surges every year, it will become possible to purchase Amazon products, the most preferred shopping mall by direct buyers, domestically without complicated procedures, gradually blurring the boundary between the domestic market and the direct purchase market. Moreover, the status of 11st, currently ranked fourth, is expected to rise sharply.
According to WiseApp, a retail analysis service company, which sampled payments made by credit card, debit card, bank transfer, and mobile micropayments for major internet shopping services in the first half of the year, 11st’s transaction amount in the first half of this year is estimated at 5.24 trillion KRW, ranking fourth. This is about half of the 9.79 trillion KRW transaction amount of the first-ranked Naver. It is significantly lower compared to the second-ranked eBay Korea (8.87 trillion KRW) and third-ranked Coupang (7.84 trillion KRW).
E-commerce Market Landscape Expected to Change Rapidly
Once cooperation with Amazon begins, the landscape could be overturned at once. This is because it can preempt the growing demand for overseas direct purchases. According to Statistics Korea, the size of the domestic overseas direct purchase market was 3.64 trillion KRW last year. As of the first half of this year, the overseas direct purchase transaction amount is about 1.66 billion USD (approximately 1.9 trillion KRW), already exceeding half of last year’s transaction amount. According to statistics from card companies including Lotte Card, the usage rate of Amazon among direct purchase transactions accounts for 19-20% of the total transaction amount. If 11st absorbs this demand alone, it will be able to stand shoulder to shoulder with the second and third-ranked companies.
If 11st directly purchases popular Amazon products and delivers them to consumers through its logistics centers, the distinction between domestic consumption and direct purchase will become meaningless. Amazon will reduce the burden of logistics centers and domestic delivery, and 11st will be able to exclusively distribute competitive overseas products domestically. Consumers will also be able to receive products quickly and safely without using forwarding services (commonly called "baedaeji") that were essential for overseas direct purchases.
Professor Chunhan Jo of Gyeonggi Science and Technology University analyzed, "From Amazon’s perspective, since the parcel delivery market in Korea has matured through technological advancement and they have no competitive advantage, the risk of direct entry is considered high," adding, "For 11st, cooperation with Amazon, one of the two major global platforms alongside Alibaba, provides an opportunity to enhance competitiveness amid fierce competition in the domestic e-commerce market."
The reverse direct purchase market is also expected to be activated. Experts analyzed that if sellers list products on the open market 11st, there is a high possibility of growth as a global platform that also sells on Amazon. Professor Yonggu Seo of Sookmyung Women’s University said, "As the saying goes, 'Amazon sells everything except missiles,' it is a market with all kinds of products worldwide, so the ecosystem of domestic manufacturers is also expected to change significantly," adding, "Since the overseas reverse direct purchase market will open, the impact on domestic manufacturers is expected to be more positive than negative."
Synergies are also expected from the triangle of SK Telecom, 11st, and Amazon’s online video service (OTT) 'Amazon Prime,' audiobook service 'Audible,' and e-book 'Kindle.' Amazon has secured a large number of loyal customers through its membership system 'Amazon Prime Membership,' which combines content and commerce. Based on SK Telecom’s 30 million subscribers, differentiated membership services are also expected to be possible. There is also analysis that this could influence not only e-commerce but also the telecommunications market in the future.
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