[Why&Next]Naver-Led 'Anti-Coupang Alliance'... Will It Reshape the Distribution Landscape?

Lotte Distribution Group Forms Alliances in AI, Shopping, Marketing, and ESG
Kurly Collaborates on Fresh Food and Grocery Services
Supermarkets, Convenience Stores, and Supers Partner for Quick Commerce
Aiming to Counter Coupang’s Dominance and Create Synergy through Combined Strengths

Naver, the leading portal company in South Korea, is reaching out to the distribution industry to strengthen its commerce business. Strategic alliances that blur the boundaries between online and offline are spreading across large supermarkets, convenience stores, logistics companies, and even e-commerce operators. In the midst of sluggish domestic demand, companies are aiming to create synergy by combining their respective strengths to counter the dominance of Coupang. Attention is focused on whether this bold move will yield tangible results.

Increased Exposure for Sellers and Customers... Platforms Forge Alliances with Supermarkets and Convenience Stores

Kim Seulah, CEO of Kurly, is explaining the partnership strategy between the two companies at the "Naver Commerce Meetup with Kurly" event held on the 9th at Jongno Place, Jongno-gu, Seoul.

Naver and Kurly, a dawn delivery company, have formed a strategic partnership to boost user loyalty. Naver is working with Kurly, which has a competitive edge in product curation and logistics, to secure loyal customers. Kurly plans to target a new customer base that has not previously used Kurly, leveraging Naver's 40 million users. Going forward, Naver plans to expand its partnerships, including collaborations with Netflix, Kurly, and Uber Taxi.

On September 9, Naver and Kurly held the "Naver Commerce Meetup with Kurly" event at Jongno Place in Jongno-gu, Seoul, where they announced their partnership plans. Through this partnership, both companies aim to enhance user loyalty. Naver will work with Kurly, which excels in product curation and logistics, to secure loyal customers and strengthen its commerce competitiveness, while Kurly aims to reach new customers through Naver's 40 million users who have not previously used Kurly.

'Kurly N Mart' joined Naver Plus Store. Provided by Kurly

Previously, on September 5, Naver and Kurly launched the online grocery shopping service "Kurly N Mart." At Kurly N Mart, customers can receive popular products from Naver Smart Store and fresh food from Kurly via dawn delivery. Naver Plus Membership users receive free delivery on purchases over 20,000 won. In addition, Kurly’s logistics subsidiary, Kurly Nextmile, joined the Naver Fulfillment Alliance (NFA) earlier this month, enabling dawn delivery for Smart Store products as well.

Kim Sanghyun, Vice Chairman and General Manager of Lotte Distribution Group (right), and Choi Sooyeon, CEO of Naver, are posing for a commemorative photo during a roundtable held on the 5th at Naver 1784 in Bundang-gu, Seongnam-si, Gyeonggi Province to discuss AI Transformation (AX) innovation in online and offline distribution. Provided by Lotte Distribution Group

Lotte Distribution Group has also recently agreed with Naver to form a strategic business alliance in four areas: artificial intelligence (AI), shopping, marketing, and ESG (environmental, social, and governance). The two companies plan to cooperate in developing agentic AI for four key areas: shopping, merchandise planning (MD), operations, and management support. Agentic AI refers to autonomous AI that sets its own goals, analyzes its environment, and makes optimal decisions. Last month, Lotte Distribution Group announced its goal to realize an "Agentic Enterprise" by integrating agentic AI throughout its corporate operations to improve work efficiency and automate decision-making.

In the shopping sector, the plan is to leverage Naver’s influential platform ecosystem to enhance benefits for consumers. Specifically, there will be point accumulation promotions for payments made with Naver Pay at offline stores such as Lotte Mart, Lotte Super, and Hi-Mart, and there are phased plans to link products from Lotte’s offline stores, including Seven Eleven, to Naver’s quick commerce service "Jigeumbae-dal" (Now Delivery). In marketing, the companies will use Naver Cloud’s AI advertising solution (NCLUE) to expand their market. For ESG, they are considering using Lotte Department Store and Lotte Mart/Super’s offline locations to provide successful sellers from the Naver platform with expanded offline sales channels.

Since May, the Naver Plus Store, which was launched in March, has been collaborating with various distribution companies to provide the "Jigeumbae-dal" (Now Delivery) service, which delivers products ordered by consumers from nearby offline stores within one hour. Major convenience store and supermarket chains such as GS25, GS The Fresh, CU, Emart Everyday, and Homeplus Express have joined the platform.

Low Cost, High Efficiency, and a 350 Trillion Won Simple Payment Market... Naver’s Strategy

Industry insiders view Naver’s broad-based collaboration with multiple distribution companies as an effort to match Coupang’s competitive edge throughout the entire distribution process, from product search to ordering and delivery.

An industry official explained, "Rather than operating its own logistics centers like Coupang, Naver can enhance price competitiveness and operational efficiency by collaborating with distribution channels that handle a wide variety of manufacturer products, thereby saving on logistics and storage costs. For online and offline distribution companies, working with Naver, which has the largest user base in the country, is an opportunity to expand their customer pool."

In fact, Naver has established the Naver Fulfillment Alliance (NFA), a logistics consortium including Kurly’s logistics subsidiary Kurly Nextmile and nine other companies such as CJ Logistics, and operates the "Naver Delivery" (N Delivery) service.

This move is interpreted as Naver’s effort to expand its payment (Naver Pay) business by strengthening partnerships with distribution channels that generate high transaction volumes. Naver Pay, operated by Naver Financial, is competing with Kakao Pay and Toss Pay as one of the "Ne-Ka-To" big tech companies offering various financial services in Korea’s simple payment service market. Based on last year’s revenue, Naver Pay ranked first with 1.6473 trillion won, followed by Toss Pay with 819.6 billion won, and Kakao Pay with 766.2 billion won.

Initially, Naver Pay supported simple payments mainly for online transactions within Naver’s own ecosystem, such as Naver Shopping and Naver Webtoon, but as the market rapidly expanded, it has increased partnerships with external companies covering both online and offline. As a result, last year, Naver Pay’s annual transaction volume reached 72.1 trillion won, with the share of external payments exceeding 50% for the first time. According to the Bank of Korea, the domestic simple payment service market grew more than tenfold, from about 23.5 trillion won in 2016 to about 350 trillion won last year.

An industry official noted, "Simple payment operators are encouraging usage by offering discount coupons or point accumulation benefits to online shopping customers. The much larger offline shopping market represents significant growth potential for these operators." According to annual online shopping trends published by Statistics Korea, the total retail sales covering both online and offline distribution last year was about 638 trillion won, with online shopping accounting for 242 trillion won, meaning the offline market was more than 2.5 times larger.

Chasing Coupang Remains Challenging... "A Survival Strategy"

E-commerce and offline companies have joined forces to counter Coupang’s prolonged dominance, but narrowing the market share gap remains difficult. According to WiseApp Retail’s analysis of comprehensive mall app usage last month, Coupang had an overwhelming lead with 34.217 million monthly active users (MAU). The second place was Aliexpress, a Chinese shopping platform, with 9.2 million users, followed by Temu (8.122 million), 11st (7.963 million), Gmarket (6.679 million), and Naver Plus Store (4.312 million).

Lee Youngae, a professor of consumer studies at Incheon National University, commented, "To attract the customer base that Coupang has secured through its Wow Membership, competitors would have needed to accept losses and invest in infrastructure over a long period or pursue a premium strategy to raise average order value. Competitors’ responses have been slow in this area, making it difficult to find a breakthrough that could overturn the market landscape." She added, "With a clear market leader, leveraging the strengths of a giant platform like Naver and distribution companies is a less burdensome approach than directly confronting Coupang one-on-one. Strategic alliances out of necessity to reduce costs and efforts at each stage of distribution will continue."