The battle of cross-border e-commerce has come to South Korea

Although Shein is ambitious to enter the Korean market, it seems to lack in-depth understanding of it, said a person in the Korean fashion and apparel industry.

On July 8, Shein’s pop-up store in Korea officially opened. However, despite the high attention and discussion of Shein in the Korean market, there were few customers in the early days of the pop-up store, which triggered some Korean industry insiders to have new views on Shein’s development in Korea.

According to statistics from Korean media, only about 30 customers entered the Shein pop-up store from 11 a.m. to 1:30 p.m. on the opening day. In addition, the inaccurate translation of the label in the store, the style of imitating other brands, and the 10% value-added tax have caused mixed reviews of the Shein pop-up store.

Previously, the news of Shein’s entry into the Korean market once caused concern and panic in the Korean clothing industry, and many online fashion platforms and brands discussed it. The head of a Korean SPA brand publicly stated that Shein has a history of more than ten years and has considerable influence in North America. This entry into Korea will have an impact on many domestic fashion brands.

Many Korean media refer to Shein, AliExpress and Temu as the “Altesh (Ali, Temu, Shein)” Chinese e-commerce trio.

Before Shein entered the Korean market, Chinese overseas companies AliExpress and Temu had already made some arrangements in the Korean market. For example, AliExpress took the lead in launching a global five-day delivery service to meet the needs of the Korean market. At the same time, Alibaba International Station also announced that it will open a Korean-exclusive corporate website in the second half of the year to meet the growing demand of B2B buyers for Korean products.

As AliExpress became the second largest e-commerce platform in South Korea, Korean e-commerce platforms have increased their investment in logistics and delivery services and optimized merchant service initiatives, intending to win back more users and sellers in this competition.

Now, with the addition of Shein, South Korea, the world’s fourth largest e-commerce market, may usher in greater changes.

At present, Shein has completed logistics testing to ensure a smooth purchase process and has freight entering South Korea, but it has not yet been fully rolled out. Lao Jin, a Shandong native, has been engaged in cross-border logistics and express delivery in South Korea since 2014. He shared the latest developments of Shein in South Korea.

Shein has long planned to enter the Korean market. In December 2022, Shein registered a company in South Korea and began to promote it on social platforms in August of the following year. In May of this year, Shein officially responded to its market layout plan in South Korea, saying that it was waiting for the right time and intended to invest heavily in the Korean market like AliExpress and Temu. At this time, Shein’s official Korean website has been online for a month, selling all categories of goods.

On June 17, Shein posted a pop-up store recruitment announcement on the Korean recruitment platform, recruiting models and store managers. Subsequently, on June 20, Shein announced its official entry into the Korean market. Prior to this, Shein had carried out a series of marketing actions for the Korean market, such as hiring Korean actress Kim Yoo-jung as the global spokesperson for its Dazy brand, which attracted great attention.

Dazy is a brand launched by Shein in 2021, focusing on a fresh style, and is currently popular in Southeast Asia. As the spokesperson for Dazy, Kim Yoo-jung directly participated in the planning of the S/S series to create a summer atmosphere. This kind of celebrity-planned theme model is a common marketing method for Shein in overseas markets.

Industry veterans said that Shein opened a pop-up store to increase its visibility in Korea and test market reactions. The pop-up store in Dongcheng District, Seoul is divided into two floors. The first floor displays dresses and Kim Yoo-jung’s shooting scenes, and the second floor has a fitting room to display other clothes.

The Korean clothing market is roughly divided into three categories: low-priced unbranded clothing, SPA brand clothing, and designer brands and street fashion brands. SPA brand clothing accounts for the main sales volume in the Korean fashion market in 2022. Therefore, as a SPA brand, Shein will directly compete with local SPA brands after entering the Korean market. At the same time, Shein’s platform strategy may also have an impact on Korean local fashion online platforms.

Some Korean media believe that Shein will start a price war with AliExpress and Temu to change the market pattern. However, Korean local fashion e-commerce companies such as Musinsa and Zigzag said that because the target users do not overlap, Shein’s low-price strategy will not directly compete with them. Despite this, these platforms remain wary of Shein.

Korean clothing industry practitioners said that Shein’s fast production speed is one of its advantages. The low-price strategy may attract consumers who originally bought low-priced clothing, causing major Korean fashion brands to lose low-loyalty customers. If Shein improves product quality, it may also pose a threat to designer brands and street brands.

Shein, AliExpress, and Temu, the three major Chinese cross-border e-commerce platforms, are actively promoting in the Korean market while adhering to the low-price strategy.

When Temu entered Korea in July 2023, it issued high-value coupons to attract users. Since the second half of 2018, AliExpress has rapidly occupied market share in the Korean market through big promotions such as Double 11 and 618 and aggressive price subsidies. Overseas logistics and warehousing practitioners pointed out that the price wars of these platforms are extremely fierce, aiming to quickly occupy the market.

In April this year, AliExpress launched the “100 Billion Carnival” promotion, providing a large number of shopping subsidies and additional discounts. Shein’s Korean official website also frequently launches discount activities, promoting month-end promotions and other preferential information through pop-ups and carousel pictures.

However, according to Korean media reports, the low-price strategy of AliExpress and Temu has encountered growth bottlenecks in the Korean market. Although the tax-free policy for low-priced goods is beneficial to these platforms, Korean consumers’ emphasis on product quality has led to the failure of the low-price strategy. Especially for mid-to-high-priced clothing, fashion goods and cosmetics, Korean consumers prefer to choose other channels to buy.

David Lee said that Korean consumers are cautious about low-priced goods on Chinese e-commerce platforms and prefer to buy products with guaranteed authenticity.

In order to attract more sellers to settle in, AliExpress and Temu launched a commission-free policy, which successfully attracted a large number of Chinese cross-border sellers and well-known Korean brands. For example, CJ CheilJedang Corp, the largest food manufacturer in South Korea, chose to settle in AliExpress after breaking off relations with Coupang.

In addition, Temu’s hosting model has also been introduced to the Korean market. However, AliExpress currently only provides a VMI warehousing model, that is, merchants consign goods to the platform warehouse.

Industry veterans believe that after Shein enters the Korean market, it may copy the successful strategies of AliExpress and Temu, further intensifying competition in the Korean e-commerce market.

Coupang, a local Korean e-commerce platform, has taken a number of positive measures to cope with the impact of the three major Chinese cross-border e-commerce platforms. In 2023, Coupang launched a new seller launch plan to attract Chinese sellers to settle in and provide full-service support. In 2024, Coupang launched the local “rocket warehouse” plan to provide Chinese top sellers with local rocket warehouses and all-round services in South Korea to help them quickly open up the Korean market.

David Lee revealed that Coupang plans to invest 3 trillion won in logistics infrastructure in the next three years, with the goal of achieving “Rocket Delivery” nationwide in 2027. Coupang has many logistics and warehousing centers in South Korea, covering most of the population. In addition, South Korea’s small land area and the fast-paced lifestyle of the people make its express delivery service highly praised.

However, the collective price increase in the Korean express delivery market has brought challenges to Chinese e-commerce platforms. The operating costs of platforms such as AliExpress and Temu have increased due to the increase in express delivery fees, which may aggravate the “money burning” degree of their low-price strategy, especially when they are not yet profitable. The four major express delivery companies in South Korea decided to collectively increase prices, with the express delivery fee per order rising to 1,850 won.

Despite this, AliExpress and Temu still plan to expand their logistics and distribution capabilities to further open up the logistics chain. David Lee suggested that AliExpress establish logistics centers in key areas to provide faster services. At the same time, although the Korean express delivery market is monopolized by giants, there are still opportunities in the warehouse and distribution system. Chinese express delivery companies are expected to enter the Korean market by providing faster services.