Domestic e-Commerce Market Shakes Up 'American Dinosaur'... Major Shift Expected This Year

eBay Hints at Selling Korean Business
Despite 11% of Total Sales, Overcompetition and Sharp Decline in Operating Profit Margin
Strong Scale Gives Acquiring Company Market Advantage

Amazon Collaborates with 11st... Coupang Seeks Re-Entry into US Nasdaq
Major Shift Expected in Domestic E-Commerce Market

[Asia Economy Reporter Yuri Kim] The domestic e-commerce market is on the verge of a seismic shift, keeping pace with the global business restructuring moves of American e-commerce giants Amazon and eBay. The U.S. eBay headquarters has officially announced its intention to sell eBay Korea, and Amazon is set to enter the domestic market within the year through a partnership with 11st. The e-commerce market, which surged amid the COVID-19 pandemic, is heating up intensely.

◆ U.S. eBay Signals Possible Sale of Korean Business

On the 19th (local time), U.S. eBay stated in a press release that it has "initiated a process to evaluate, review, and explore a wide range of strategic alternatives for its Korean business," adding that it is "considering options to maximize shareholder value and create future growth opportunities for the business." eBay Korea operates Gmarket, Auction, and G9, making it the largest open market operator in Korea. eBay Korea's transaction volume in 2019 was estimated by the industry at 19 trillion KRW, accounting for 14% of the 135 trillion KRW online shopping transaction volume that year. In 2019, eBay Korea's revenue surpassed 1 trillion KRW for the first time, reaching 1.0954 trillion KRW. Operating profit increased by 27% year-on-year to 61.5 billion KRW, marking the only online shopping mall in Korea to post profits for 15 consecutive years.

However, its growth trajectory is now in question. As the domestic e-commerce market, involving established companies, major domestic distribution conglomerates, and ICT firms, engages in cutthroat competition, eBay Korea's operating profit margin, which was 20% in 2010, sharply declined to 5.7% in 2019. Concerns persist about the limitations of the telecommunication sales business model, which connects product sellers and consumers and earns commission fees. Recently, the e-commerce market has been increasing the proportion of direct purchases to offer differentiated products and faster delivery.

Industry insiders believe that the official consideration of a sale, despite eBay Korea accounting for about 11% of eBay's total annual revenue, is due to these factors. Timing is also considered a key factor, with the impact of COVID-19 elevating the value of contactless e-commerce businesses, prompting a strategy to increase the sale price. Some interpret the appointment of Jeon Hang-il, who led eBay Japan, as the new president of eBay Korea the day before as a move anticipating the acceleration of the sale process this year.

The sale of eBay Korea is expected to significantly shake up the domestic online shopping mall market. The acquiring party would gain a scale advantage capable of moving the market amid intensifying competition. However, there are also views that the high asking price and challenging market environment will make the sale difficult. eBay is reportedly seeking a sale price exceeding 5 trillion KRW and is gauging purchase interest from domestic and foreign companies as well as private equity funds (PEFs). Industry experts say that while the current asking price may be challenging, participation decisions could vary depending on the conditions once the deal becomes concrete.

◆ Amazon Partners with 11st

American e-commerce giant Amazon also partnered with Korea's 11st last year and announced plans to intensify collaboration this year. If Amazon transactions become possible through 11st instead of overseas direct purchases, this is also expected to disrupt the domestic e-commerce market landscape. Lee Sang-ho, president of 11st, declared in his New Year's address that "this year, we will smoothly advance cooperative projects with Amazon to provide domestic customers with a unique shopping experience where they can purchase Amazon products on 11st."

Meanwhile, Coupang is preparing to shake up the market by aiming to enter the U.S. stock market from Korea. Bloomberg recently estimated Coupang's corporate value at over $30 billion (approximately 32.955 trillion KRW) and reported that an initial public offering (IPO) for a Nasdaq listing is expected in the second quarter of this year. Industry insiders believe that if Coupang succeeds in listing on Nasdaq, it will be able to offset its chronic deficits and accelerate aggressive moves in the domestic e-commerce market.