[Inside Chodong]How to Survive the C-Commerce Onslaught

Three bunches of Philippine bananas, 12 Thai mangoes, two trays of domestic free-range eggs, 3kg of Haenam yellow soil sweet potatoes... These are 1,000-won products featured in the recent ten-day “time deal” event conducted by the Chinese e-commerce company AliExpress targeting Korean consumers. Since these ultra-low-priced products are sold in limited quantities at specific times, it was not easy to purchase even by clicking quickly, leading consumers to call it “Alrigosi” or the “1,000-won chaos.” Most reviews mentioned that the ordered products arrived within a day or two. Although it is clearly a C-commerce (China + commerce) company, it is virtually no different from domestic open markets. In a high-inflation situation where the price of a bunch of green onions or a single apple becomes a daily issue, consumers have every reason to pay attention. On the first day alone, more than 177,000 people flocked to Ali’s random coupon event, which distributed as much as 1 billion won worth of coupons for Korean products.

The so-called C-commerce platforms known as “Al-Te-Shi (Ali, Temu, Shien)” are aggressively targeting the Korean market, quickly absorbing even consumers who had hesitated to purchase due to doubts about product quality and delivery speed. Since ultra-low-priced products made with cheap Chinese raw materials and labor costs skip intermediate distribution processes and are delivered directly to domestic consumers through the platform, domestic companies that have to pay tariffs, VAT, and costs for obtaining KC certification (Electrical Appliance Safety Certification) to sell the same Chinese products have no way to compete. Moreover, it is noteworthy that these C-commerce platforms have quietly expanded their sales to food and beverages. Unlike cost-effective products that can be lightly used and discarded if broken, consumers tend to apply much stricter standards when purchasing food and drinks they consume directly. Consumers receiving food ingredients produced domestically and delivered right to their doorstep find their previous prejudices against C-commerce unfounded.

From the perspective of low prices and consumer benefits, there seems to be no way to block the expansion of these C-commerce platforms in the domestic market. Ali is aggressively marketing by offering a groundbreaking condition of zero commission fees to platform sellers (vendors) to encourage their entry. Although the government is hastily considering measures such as strengthening crackdowns on counterfeit sales, establishing consumer damage compensation systems, and easing domestic distribution industry regulations, laws and systems cannot keep up with the pace of changes on the ground. While it has been stated that fair competition will be fostered through tax and regulatory applications on Chinese platform sellers, it is uncertain whether there will be effective improvements to the disadvantageous situation faced by domestic distributors anytime soon.

The most fundamental solution is for domestic e-commerce platforms to develop global competitiveness that surpasses these Al-Te-Shi platforms. Of course, there is no chance of winning a price war against Chinese platforms backed by low production costs and powerful financial resources. Considering the rapid pace at which they are encroaching on the domestic distribution market, there is no time to waste. If the survival competition in e-commerce is left unattended, it is not an exaggeration to warn that the foundation of not only distribution but also various manufacturing industries supplying products could collapse.

To survive in the rapidly changing distribution market, one must quickly ride the wave of change. If the domestic e-commerce industry, like Coupang which announced a large-scale facility investment the day before, strengthens overall competitiveness from manufacturing to distribution and logistics to confidently confront C-commerce, or if domestic sellers activate reverse direct purchasing through overseas e-commerce, a new market may open. As always, crisis is also an opportunity in another form.