Identical 'Chinese-made' Air Fryers... 40,000 Won on Aliexpress, 90,000 Won in Korean Markets, Why? [Ultra-Low Price Era]②

AliExpress in China, the Secret to Ultra-Low Prices
Chinese Products Wearing Korean Brands Priced Twice as Much

#Pulmuone Health & Living, a health food manufacturer, received a corrective order from the Fair Trade Commission last August for coercing its distributors to sell kitchen appliances, which were OEM-produced in China, at prices set by the company during the import and sales process. The Chinese-made small home appliances, such as air fryers and microwaves imported by the company, were sold by domestic retailers on open markets like Naver Smart Store, but Pulmuone Health & Living took measures to prevent price reductions on these products. This violated the Monopoly Regulation and Fair Trade Act (Fair Trade Act), which prohibits resale price maintenance.

In May, the government announced measures to block overseas direct purchases of items without safety certification following safety concerns over products sold through direct purchase apps from China, but withdrew the measures three days later amid strong backlash claiming infringement on 'consumer choice.' Overseas direct buyers argued, "Since the products are the same Chinese-made items, domestic shopping malls sell them at higher prices," and "Blocking cheaper shopping channels should not be allowed." In fact, there is a significant price difference between Chinese products sold in domestic shopping malls and those sold on Chinese e-commerce platforms known as 'Al·Te·Shu' (AliExpress, Temu, Shein).

46,500 KRW vs 93,600 KRW

According to a comprehensive report by Asia Economy on the 23rd, a 12ℓ capacity multifunctional air fryer manufactured by Chinese home appliance manufacturer Company B was being sold on AliExpress for 46,500 KRW including shipping as of the previous day. However, the same product was listed on domestic open markets at 93,600 KRW. Both products had identical detailed descriptions, but the price difference was nearly double.

Both products originate from China. Most domestic home appliance companies produce small appliances through OEM (Original Equipment Manufacturing) by ordering local manufacturers to produce the goods and then import them into Korea. OEM is a method where domestic companies entrust local manufacturers with production facilities to manufacture products. Mainly, OEM is entrusted to manufacturers in China or Southeast Asian countries because production costs, including labor, are competitive there. These products are imported into Korea and sold under domestic company brands.

Most small home appliances sold domestically are produced via OEM. There are also many cases of ODM (Original Design Manufacturing), where not only production but also development is handled by local Chinese companies. This method involves simply attaching a domestic brand logo to products made in China. Appliances produced locally in China are sold at prices that include logistics and distribution costs, tariffs, after-sales service costs, and the home appliance company's margin. This explains the price difference compared to products directly purchased from China through AliExpress.

Samsung Securities Research Center explained in a C-commerce report published in March, "The reason C-commerce companies can sell products at low prices is basically because they skip domestic intermediaries and connect directly with production factories or sellers in China," adding, "Many domestic sellers listed on domestic shopping malls purchase products from China and add their margin when selling, but Chinese direct purchase platforms have no intermediaries, so prices are inevitably lower."

"Don't lower the price"... Why Chinese-made products with Korean brands are expensive

Domestically, some importers artificially controlled prices to raise selling prices, contributing to the price gap. According to the Fair Trade Commission, Pulmuone Health & Living established a new business division called Lohas Kitchen (LK) in 2015 to import and sell domestic and foreign kitchen appliances, and from early 2021, imported kitchen appliances produced via Chinese OEM and sold them under brands such as 'Glass Cook' and 'Steam Cook.'

The company supplied products either by direct sales on platforms like Naver, Gmarket, Coupang, SSG.com, Samsung Card employee malls, or through four distributors called 'vendors' who resold the products. Direct sales accounted for a high proportion of 80%.

Pulmuone Health & Living forced three out of the four vendor distributors reselling these products to sell at designated prices. If a distributor sold below the designated price, the company demanded that the distributor raise the price to the minimum resale price or requested measures such as non-exposure in portal searches. The company also controlled the distributors' online minimum resale prices by pre-designating promotional prices and requiring prior approval for large-scale promotions. If the minimum resale price was not maintained, the company hinted at terminating transactions or considered contract termination for non-compliance.

The Fair Trade Commission judged that Pulmuone Health & Living's minimum resale price maintenance policy was illegal because it restricted price competition at the distribution stage and infringed on distributors' autonomy. The commission stated, "Due to the respondent's request to raise selling prices, distributors raised prices to the minimum resale price, causing consumers to lose opportunities to purchase products at discounted prices, resulting in a relatively clear decrease in consumer welfare."