COVID-19 'Revenge Spending' Outlet
Record High Expected for Overseas Direct Purchases
Domestic Distribution Industry Also Launches 'Counterattack' Strategy
[Asia Economy Reporter Cha Min-young] On November 27 (U.S. local time), ahead of 'Black Friday,' domestic direct purchase shoppers are gathering in front of their monitors. With international travel blocked due to the novel coronavirus infection (COVID-19), revenge consumption has intensified, and U.S. fashion companies facing difficulties have offered unprecedented discounts to clear inventory. Additionally, the strengthened Korean won has increased price competitiveness, and the domestic overseas direct purchase market size is expected to reach a record high.
According to the industry on the 27th, the domestic overseas direct purchase market size is expected to easily surpass 4 trillion won this year. According to Statistics Korea, the cumulative overseas direct purchase amount for the third quarter reached 2.8519 trillion won, an 8.2% increase compared to the same period last year (2.6369 trillion won). The won-dollar exchange rate fell from the 1,200 won range in March to 1,104 won on this day, raising expectations for unprecedented price discounts. Due to the third COVID-19 pandemic wave, including in Korea, travel and outing restrictions have been imposed, causing domestic consumers, whose consumption channels have been blocked, to choose direct purchases as a channel for revenge consumption.
Amazon started a promotion on the 18th, offering free shipping to Korean customers who purchase $99 or more in total for Amazon.com’s own products. This is seen as a data collection effort on Korean consumer preferences ahead of collaboration with 11st. Popular products on Amazon include electronics with large discounts such as TVs, gaming electronics, laptops, SSD external drives, Bluetooth speakers, and earphones.
Online clearance sales by major fashion brands are also noteworthy. 'Polo Ralph Lauren' offered a 40% discount for purchases over $125 on its official U.S. online website from the 25th to the 27th. Signature products such as cable knitwear, short-sleeve polo shirts, padded items, and hats ranked high among bestsellers. 'Tommy Hilfiger' offers 20-40% discounts, and 'Adidas' offers 30-50% discounts. Coffee machine specialist 'Nespresso' gives away a 'Vertuo' machine when purchasing over 300 coffee capsules.
The distribution industry expects that following Alibaba Group’s Singles’ Day (November 11) record-breaking sales totaling 84 trillion won, Black Friday-related sales will also reach record highs. Concerned about losing customers to direct purchases, domestic retailers are fiercely competing. E-commerce companies such as Lotte ON, SSG.com, 11st, and eBay Auction, as well as domestic fashion companies like The Handsome.com and SI Village, are each holding Black Friday and Black Week special sales events.
Meanwhile, as the scale of overseas direct purchases rapidly increases, consumer disputes are also rising, requiring special caution. The number of consultations related to overseas purchases, delivery agency services, and overseas direct purchases received by the Korea Consumer Agency has steadily increased each year: 8,681 cases in 2017, 11,194 in 2018, and 13,463 in 2019. The Consumer Agency pointed out, "As overseas direct purchase businesses increase on domestic open markets, consumer caution is necessary," adding, "Buyers should carefully check all aspects before purchase, including customs and VAT, international shipping fees, overseas return fees, and delivery services."
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