Cross-border e-commerce (CBEC) in South Korea
South Korea has seen an increasing sales of "foods purchased via overseas direct online shopping channels (해외직구식품)”, or cross-border e-commerce (CBEC). In 2020 total cross-border sales into South Korea totalled a value of 4 trillion KRW (around €2.9 billion). In the first quarter of 2021, cross-border sales grew by 44% versus the year before.
(Country of Origin for Total Cross Border Imports South Korea Q1 2021, Data source:KOSIS)
Imported food sold to South Korea via CBEC have been dominated by imports from the US market, making up 23.4% of total amount. Popular categories include health supplements, drinks and snacks.
(Country of origin of cross border food and beverage imports Q1 2021, Data source:KOSIS)
The market size of CEBC food sector continues to increase for the lower price and convenience. For enterprises intending to sell foods to South Korea via online platforms, Coupang is a great option for entering the Korean food & beverage market.
Coupang is a Korean online market platform combining the e-commerce capability, shopping capability, and the food service deliveries into one. It is a South Korean e-commerce company based in Seoul, South Korea but incorporated in the USA. Coupang was founded in 2010 and become the largest online marketplace in South Korea. In 2020 the platform had revenue of $12 billion and an operating income of $527 million. Coupang has 37,000 employees as of the end of 2020.
1. What makes Coupang different?
Coupang is especially known for its excellent logistics services and obsession with the customer experience.
The founder wanted to address the problems of
Long delivery times
Expensive shipping (with cut-off times and limited products)
Massive amounts of packaging waste and unlimited returns
The solution became an end-to-end integrated system using cutting-edge technology to wow both customers and vendors. The data-driven approach meant that the customer and vendor experience could be controlled and improved at all process stages through hugely increased tracking efficiency. Basically, consumers are offered a white glove purchasing experience at an affordable price. This means shipping fast and reliably to a vendor
(1) Rocket Delivery
The signature delivery service of Coupang is called Rocket Delivery. This service is free for Rocket membership subscribers and offered to non-subscribers if they purchase more than 20,000 Korean Won (KRW) – that's about €14. According to Wikipedia1, 32% of Coupang's users are subscribed, and 99.3% of Rocket delivery orders are delivered within one day, mostly overnight deliveries if orders are placed before midnight.
(2) Rocket Wow
Rocket Wow is a paid subscription service, similar to Amazon Prime and costs around €2 per month. This includes free deliveries and returns, discounts on certain products, one-day delivery as standard and the possibility to receive Rocket Fresh products (food and drinks) by 7 am for the orders placed before midnight.
(3) Obsession with customer experience
Those customers who have a membership to the Rocket programme have a considerable increase in spending. This has proven that the focus on loyal customers is the right policy. Korean customers love the convenience of the experience and the fast delivery, often on the same day, including during weekends and holidays. Besides, 75% of the Coupang packaging is reusable. The eco-friendly packaging is another reason why customers enjoy shopping here.
2. Food offerings
Coupang has a wide selection, especially of fresh food and international foods from across the globe. Furthermore, there's also the service Coupang Eats which allows you to order deliveries from your favourite restaurants.
During the pandemic, the platform also began with livestream videos talking about cooking, infotainment topics, and selling products.
3. Coupang Global Marketplace
To serve the growing demand for high-quality imported overseas goods, Coupang developed its Global Marketplace, which offers a variety of advantages for both consumers and sellers.
Selling food via cross-border platforms is convenient for overseas brands and is a great way to test the market. However, a range of products are prohibited from selling overseas online. In the "food and beverage" space, the forbidden items include refrigerated or frozen products, alcohol, cigarettes, and medicine. (For more compliance suggestions from ChemLinked, please refer to the last part of this article).
4. Applying to be a Global Marketplace Vendor
Fill out the application here2. No Korean bank account is required.
List the products to sell on Coupang and work out the budgets to support the sales development
Prepare for sales
Documentation
During the application process, enterprise needs to provide the following documents and information:
A copy of the business license
ID proof
Letter from the bank or a copy of a bank statement proving that you have an account and that it's also in the same name as your business license
Proof of who owns the business
Proof of The contact person and the contact number
5. Promotion Products on the Global Marketplace
As for product promotion, like other e-commerce marketplaces, enterprises can place product advertisements on a Pay per click basis.
In addition, live streaming is an important part of marketing in South Korea, which is an effective way of driving traffic to the brand.
For global vendors on the Coupang Global Marketplace, there are also specific promotions such as Global Day or the Gold box.
6. Fees & Payments
Selling on the Global Marketplace is cheap compared to other marketplaces within Asia, such as Alibaba's T-mall3, jd.com4 or Shopee5. The actual commission due varies depending on the category, ranging from 4 -11%. There are no other fees due.
Vendors receive their money paid out from deliveries monthly. Enterprises can receive the payments in most major currencies, such as GBP, EUR or USD.
7. Big Data Analysis
One advantage of selling via e-commerce is to analyse the data in the dashboard, which is easily accessible. Coupang is no exception to this.
8. Pricing
Pricing can be tricky for selling via e-commerce. For enterprises that intend to sell the product offline in South Korea, if the prices are not set at a suitable level, it may bring difficulties for importers to sell the products in the future. Additionally, e-commerce platforms need to have the ability to run dynamic promotions, which means that Coupang allows their sellers to set certain price thresholds and corridors within which promotions can be organised.
9. Logistics, Customs and Import Requirements
Unless the product belongs to a category requiring a KC Mark6 (the Korean Certification standard), the products will not need a Korean label to be sold on Coupang. However, products such as children's products are subject to a KC mark6; therefore, they need a label in Korean with ingredients and feeding instructions.
Three methods of customs clearance for courier packages
1. List clearance for packages with a value of under $200. This kind of clearance is allowed only for certain kinds of products. It includes items for personal use deemed duty-free and will be custom cleared based on a bill of lading. In order to do this, the consignee needs to submit their personal unique customer's club code and this is limited to one shipment per person per day.
2. The next level of customs clearance is so-called simple customs clearance for packages with a value between $200 – $2,000. These are cleared according to the so-called general customs list.
3. For anything over the value of $2000, the enterprise needs to make a general regular import decoration which is a more complicated process.
Disclaimer：this article was originally written and published by Kathryn Read. ChemLinked compiled the key points. Find the original version here.
Kathryn Read, MIEx (Grad), is an international sales and marketing consultant with over 25 years’ experience developing niche products in emerging markets. She helps small and medium companies to break through international barriers, creating successful entrepreneurs and a thriving global marketplace. Her company focuses on supporting SMEs in the consumer goods space to expand into South East and East Asia, including strategic planning, partner search, training and coaching for teams working with Asian partners, etc.
Notes from ChemLinked
Although requirements for imported foods sold via CBEC is much easier than general trade, compliance is still essential for business entities conducting online business targeting Korean consumers.
As products purchased directly by the consumers are deemed as private goods, these products are not subject to general custom clearance inspection, thus are difficult to be regulated by Korean authority. However, foreign foods may contain materials that harm humans and should be prohibited from importation.
Therefore, the South Korea specified the provisions to designate prohibited ingredients in “foods purchased via overseas direct online shopping channels”. Foods with seven kinds of ingredients, including narcotics, drug’s effective ingredients, non-compliance food ingredients or raw materials, non-noticed functional ingredients, internationally reported ingredients with hazard risks, ingredients derived from ruminants from BSE countries, and other ingredients deemed as potentially harmful by MFDS, are prohibited from being imported to South Korea. A list of the prohibited ingredients is also introduced (check here for the whole list).
ChemLinked suggests enterprises intending to conduct online food selling business to pay attention to the product compliance.
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