E-commerce Market Segmentation... Expansion of 'Vertical Commerce' Emphasizing Expertise

Expansion of Specialized Malls Strengthening Specific Fields Like Supplements, Meat, Fashion, and Interior
MZ Generation Consumers Focused on Finding the Perfect Specialized Vertical Commerce for Themselves

Major vertical commerce companies (Photo by iHerb).

[Asia Economy Reporter Yuri Kim] As the domestic ecommerce market becomes more segmented, the specialized malls that deeply focus on specific product categories, known as 'vertical commerce' platforms, are also expanding. Recently, vertical commerce platforms have gained popularity, especially among MZ generation (Millennials + Generation Z) consumers who actively seek out unique products.

Representative vertical commerce platforms include iHerb, a health functional food specialized e-commerce; Jeongyookgak, a meat specialty mall; Musinsa, a fashion specialty mall; and Today’s House, an interior design specialized platform.

iHerb gained recognition by providing Korean consumers with high-quality health functional foods at reasonable prices since the domestic market was a barren land for such products over a decade ago. From the early days, it offered Korean language services and established a Q&A system in Korean to facilitate convenient shopping. It also enhanced platform trust by allowing only consumers who purchased and used the products to leave reviews, thereby serving as a specialized community for health supplements.

Considering that shipping costs are one of the biggest burdens in overseas direct purchases, iHerb offers free shipping for purchases over 20,000 KRW. Following the introduction of Payco and KakaoPay last year, it started offering Naver Pay services this year, providing convenient payment options tailored to Korean consumers. Through these efforts, iHerb’s sales in the Korean market have grown by 62% over the past four years.

Jeongyookgak, a startup specializing in livestock products, is recognized for innovating the complex distribution network of livestock products and has led the industry since its establishment in 2016. Jeongyookgak has built an 'on-demand just-in-time' system that manufactures products immediately upon receiving consumer orders and delivers them on the same day. Typically, meat products go through a process starting from slaughtering at livestock farms, then moving through wholesale, cutting factories, and retail stores before being sold, but Jeongyookgak has significantly shortened this process.

In March, it acquired Chorokmaeul, a subsidiary of Daesang Group. The plan is to expand the market by combining its existing IT-based direct-to-consumer (D2C) experience with Chorokmaeul’s traditional distribution network.

Musinsa, meaning 'a place with a lot of shoe photos,' started as an online shoe community and has maintained profitability since its incorporation in 2012. It is a rapidly growing fashion-specialized vertical commerce platform, recording a net profit of 115 billion KRW last year. Musinsa evolved from an early website and webzine into an online select shop, establishing itself as a leading fashion platform for the MZ generation. Starting with men’s street fashion, Musinsa expanded its business within the 'fashion' category to include women’s wear, golf wear, and more, diversifying its target consumers.

The monthly active users (MAU) of Musinsa-affiliated applications approach 4 million, and its membership exceeds 10 million. Musinsa aims to lead as an incubating platform for emerging designers and brands, supporting various events and marketing to foster a virtuous cycle within the industry.

Today’s House, an interior design specialized platform praised for connecting customer experiences to revenue and integrating into users’ daily lives, is also a representative vertical commerce platform. Initially, Today’s House opened as a community sharing interior photos and experiences. It operates various categories such as virtual house tours, expert know-how, and Q&A sections, while expanding its scale by combining interior accessories and furniture stores.

Bucketplace, the operator of Today’s House, secured new investments worth approximately 230 billion KRW in April, recognizing its corporate value at about 2 trillion KRW. Leveraging this, Today’s House officially announced its overseas expansion in July by launching the Japanese version, 'oHouse,' and plans to continue business expansion centered on its core online house tour content.

An e-commerce industry insider said, "Recently, vertical commerce platforms are increasing their growth rates annually by strengthening segmentation and specialization of specific product groups, expanding community functions where users exchange information, securing loyal customers, and providing various customized services to enhance consumer satisfaction."