[Bbang Gubneun Tajagi] The Secret to C-Commerce Success: Ultra-Low Prices and AI

Even Daiso, the epitome of frugal and low-cost shopping, is said to be at risk in the future. This is due to the onslaught of ‘Al-Te-Shi-Tok.’ Al-Te-Shi-Tok refers to the four major Chinese e-commerce (E-Commerce) platforms: AliExpress, Temu, Shein, and TikTok Shop.

The competitiveness of Chinese e-commerce, also known as C-Commerce (China Commerce), tends to be explained mainly by its focus on ‘ultra-low prices.’ For consumers living in an era of high inflation, high interest rates, and high exchange rates, the ultra-low-priced products from Al-Te-Shi-Tok are practically an essential option. For $100, one can purchase three pairs of jeans, two hoodies, T-shirts, fashion hats, and more. Their marketing also employs a completely different scale of ‘massive troop deployment’ tactics, known as ‘Saochen.’ Saochen means ‘burning money.’ Temu spent 55.8 billion KRW on advertising during a single 2024 Super Bowl game in the U.S., airing six ads costing about 9.3 billion KRW per 30 seconds.

Book cover of 'Alteshtok's Assault'
Photo by The Soop

However, another key weapon of C-Commerce should not be overlooked. "These platforms are not just distribution platforms but AI (Artificial Intelligence) and big data companies." The reason Alibaba, which operates AliExpress, is also called the Chinese Amazon is because of Cainiao, the world’s largest smart logistics application. Cainiao is a cutting-edge logistics company that integrates AI, big data, and Internet of Things (IoT) technologies. The Cainiao logistics base in Wuxi, Jiangsu Province, is China’s first IoT advanced logistics site. Flat robots that look like beetles, called Xiaolan, autonomously identify ordered items through inbound and outbound information and move the corresponding goods to designated locations. The robots charge themselves and return to work once fully charged.

Shein is similar. Through AI and big data-based fashion algorithms, it selects and produces new fashion designs at the fastest pace. CEO Chris Xu built a search engine optimization (SEO) system that identifies the latest global fashion trends and quickly releases products that meet consumer demands. This is why Shein should be viewed not simply as a fashion apparel company but as an IT company.

C-Commerce’s weaknesses, such as counterfeit products and safety concerns, are also being addressed through AI and big data. AliExpress is running a ‘Project Clean’ initiative, investing 10 billion KRW over three years starting in 2024 to strengthen intellectual property protection. During this process, they established a system to identify counterfeit authenticity through text data such as seller names, logos, images, and prices. By the first quarter of 2024, using AI and big data technologies, they expelled over 5,000 sellers suspected of handling counterfeit goods and removed 1.83 million counterfeit products.

The onslaught of C-Commerce is causing contraction across Korea’s distribution and industrial sectors. Internet communication sales companies and individual business owners are closing down one after another. Even large corporations like Samsung Electronics and LG Electronics cannot feel secure. The C-Commerce onslaught is not limited to the low-price market. C-Commerce is also penetrating the white goods sector, including robot vacuum cleaners. Considering the increase in single-person households and shortened delivery times due to logistics center construction, the mid- to high-priced market exceeding duty-free limits is also exposed to the threat of C-Commerce.

The author suggests several urgent actions for the government and companies. These include strengthening certification for hazardous product management, adjusting duty-free limits based on reciprocity, and enhancing domestic consumer personal information protection and supervision. It is realistically difficult to offer products cheaper, faster, and in greater quantities than C-Commerce. The author advises observing how they manage to offer cheaper and faster products and finding ways to strengthen one’s own competitiveness. "We must accurately understand how China’s current manufacturing supply chain ecosystem is changing and the development direction of their digitalization/smartization, while exploring potential points of contact with our manufacturing and distribution ecosystems."

The Onslaught of Al-Te-Shi-Tok | Park Seung-chan | The Forest | 270 pages | 20,000 KRW