Establishment of Joint Venture with Alibaba International
Strategy to Offset E-commerce Market Slump and Strengthen Competitiveness
Shinsegae Group's strategic partnership with Chinese e-commerce company Alibaba International is being seen as Chairman Jeong Yong-jin's bold move to revive Gmarket, which is considered the group's "sore spot."
On the 26th, Shinsegae Group announced that it will establish a joint venture with Alibaba International, a subsidiary of Alibaba. The investment ratio will be 50-50, with Shinsegae Group participating by contributing Gmarket as an in-kind investment. Alibaba International will contribute both Alibaba Express Korea shares as an in-kind investment and cash. The joint venture, scheduled to be established next year, will incorporate Gmarket and Alibaba Group's e-commerce platform, Alibaba Express Korea.
Shinsegae Group's collaboration with Alibaba Group is a strategic choice to recover from sluggishness in the e-commerce market and enhance competitiveness. Previously, Shinsegae Group acquired an 80.01% stake in Gmarket from the U.S. e-commerce company eBay for about 3.44 trillion KRW. However, Gmarket recorded a cumulative loss of 100 billion KRW over two years from 2022 to last year. In the first half of this year, it also posted an operating loss of 22.1 billion KRW. This is due to the narrowing space in the domestic e-commerce market caused by Coupang's dominance.
Accordingly, it is interpreted as an intention to seek a breakthrough by joining hands with Alibaba, which has established a global sales network. In fact, through this agreement, Gmarket is expected to serve as a bridgehead for the global expansion of about 600,000 sellers. Alibaba International has a network in more than 200 countries and regions worldwide. Domestic sellers can expect to expand their sales networks mainly in China, the U.S., Europe, South America, and Southeast Asia, where there is great interest in Korean products and culture.
Shinsegae Group also stated, "An important goal of establishing this joint venture is to strengthen the competitiveness of domestic small and medium enterprises and sellers, such as existing Gmarket sellers entering Alibaba International's platform," adding, "Specific implementation plans to enhance the competitiveness of Gmarket sellers will be announced."
Industry insiders believe that Chairman Jeong decided on a strategic alliance with Alibaba considering the growing importance of the e-commerce business, which has become influential enough to threaten the offline retail market. He has already taken steps to bring Gmarket back on track. A representative example is the recruitment of Jeong Hyeong-gwon, who previously led Alibaba Korea, as the new head of Gmarket in June. This was the first leadership change in three years since Shinsegae Group acquired Gmarket. Jeong, known as a financial expert and e-commerce specialist, has focused on restructuring Gmarket's business and securing profitability through cost reduction since his appointment.
Some speculate that the joint venture established by the two companies will be listed within three years, and if listing proves difficult, Alibaba might consider acquiring Shinsegae's stake in Gmarket. However, Shinsegae Group emphasized, "This joint venture establishment focuses on building a strategic partnership with equal investment from Shinsegae Group and Alibaba," clarifying, "It is not about selling to either side but about creating synergy."
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