The relentless surge of Chinese e-commerce platforms like AliExpress, Temu, and Shein into the South Korean market, posing threats to domestic platforms, small businesses, and small manufacturers, appears to be losing momentum due to consumer dissatisfaction with shipping and returns, as well as repeated discoveries of hazardous substances including carcinogens in their products.
According to data from Statistics Korea on overseas direct purchases released on May 5, purchases from Chinese e-commerce platforms reached an all-time high of 57 per cent of total overseas direct buying in the first quarter of this year.
However, their growth has stalled. Purchases from Chinese platforms in the first quarter amounted to US$687 million, a 12 per cent decrease from the previous quarter. This is the first such significant quarter-on-quarter decline since the first quarter of 2022.
The pace at which Chinese platforms are expanding their share of the total overseas direct purchasing market is also slowing.
Their share of the total was 40.5 per cent in the first quarter of 2023, 46.8 per cent in the second quarter, 49.9 per cent in the third quarter, 54.3 per cent in the fourth quarter, and 57 per cent in the first quarter of 2024.
The increase peaked at 6.3 percentage points in the second quarter of last year before beginning to decline, with only a 2.7 percentage point rise in the first quarter of this year.
The year-on-year growth rate of purchases from Chinese platforms also appears to have peaked. After reaching a high of 67.5 per cent in the fourth quarter of 2023, it fell to 53.9 per cent in the first quarter of 2024.
The slowdown is attributed to consumers voicing continuous complaints about services, products, and deliveries after experiencing them firsthand. The frequent detection of hazardous substances in children’s products is also acting as a brake on the expansion of Chinese platforms.
According to recent data from the Korea Customs Service, cadmium levels up to 3,026 times the safety limit were found in children’s rings sold on Alibaba. Excessive levels of harmful substances were also detected in bags, headbands, shoes, and stationery items.
In response, the Fair Trade Commission will meet with executives from Alibaba and Temu on May 13 to establish a self-regulation pact. This is expected to include provisions to block the import of hazardous goods and immediately halt sales and notify consumers when harmful substances are detected.
Meanwhile, the pan-government overseas direct purchasing task force has reportedly decided not to modify the current $150 duty-free limit for such purchases, due to concerns that any adjustment could invite trade retaliation from China, potentially causing greater harm to South Korea.
This story was originally published by Ashley Song, via Korea Bizwire.
