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Boundaries blur for Korean retailers

The lines between types of Korean retailers are blurring, with open markets and social commerce businesses broadening their horizons to retail brokerage services.

The industry is leaving no stone unturned in a push to attract consumers to mobile shopping markets. Large offline discount stores are building logistics centers for online and mobile shops, and are competing to offer the lowest prices. As a result, it is becoming difficult to distinguish between online and offline retailers.

According to retail industry sources, 11street, one of Korea’s largest online marketplaces, has started a service in which the company purchases products beforehand and then sells them afterwards. Until now, 11street focused on offering open market services to mediate sales within the site. However, it now hires merchandisers who select and purchase appropriate products, sell the products to consumers, go through inventory and provide after-sales management services. This is the same operation mechanism as big box retailers such as E-Mart, or social commerce sites such as Coupang and Tmon.

To carry out the ‘direct purchase and selling’ business, 11street opened a logistics center this month. Company officials explained that if they purchase products directly from manufacturers, they can simplify distribution and cut unnecessary costs. The company can also oversee important elements of mobile shopping such as fast and convenient delivery and customer relation services.

A new ‘deals’ service suggested by GMarket also steps out of simple mediation and pushes select products to consumers. Although GMarket doesn’t purchase the products beforehand, the new service is similar to the rules of social commerce – selecting certain products considering cost, quality, inventory and current trends, and introducing them in a way which is most suitable through mobile platforms. This shows that although GMarket is an ‘open market’, it also has a stronger social commerce component.

On the other hand, social commerce services seem to be looking into the open market option.

Coupang started its open market called ‘Market Place’ in August 2015. The company used to provide retail services (purchasing products before selling them to consumers) or ‘curation’ services (selling selected or compiled products), but it has now added a service in which it provides a place where sellers and buyers can meet.

Retail industry sources explain that social commerce services may have been limited in their ability to increase the number of products held in stock since they had to purchase them beforehand.

“By adopting an open market service, they can make up for their weaknesses and at the same time give the impression to consumers that they can find ‘everything’ when they visit the site,” noted one.

The fact that big box discount stores are in a battle with online shopping sites to provide the lowest prices shows that competition between similar fields is meaningless. Retail giants E-Mart and Lotte Mart are preparing a full-scale war against online shopping sites, lowering their prices and building logistics centers to manage their deliveries.

Retail industry officials comment that adopting new business models is the only way to survive in the prolonging economic downturn.

The sales strategies and services of each retailer will become similar, and it will be even harder for them to differentiate themselves through basic selling points such as prices and delivery,” said one source.

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