Korean consumers: Less nationalistic, more value-conscious, very mobile-centric

Consumer ethnocentrism has long been a feature of the South Korean economy. In the past, Koreans had a strong “ethnic and defensive nationalism” that steered them toward local brands, said Luigi Mirri, Ferrero Korea's marketing manager. “This behaviour was encouraged, even institutionally, by past governments, and it worked as an effective social and cultural glue that made possible the ‘Miracle on the Han’.”

Even today, nationalistic brand preferences tied to the sustained power of the ‘chaebols’ represent nearly 80 per cent of national GDP.

But as South Korea arrives among the elite economies of the world since opening itself to international markets in 1997, the automatic leaning toward domestic brands has waned somewhat, aided by an increasing number of foreign-born residents bringing western culture to the country.

Today, Korean consumers do not buy out of a sense of duty to the nation like their grandparents did. Instead, they tend to look for novelty and innovation. They come at shopping decisions with a cultural underpinning emphasising materialism, immediacy and pleasure, but at the same time they behave like the economy is in a perpetual recession.

After all, the Korean consumer has the lowest consumer confidence in Asia, according to Nielsen, which attributes the malaise in part to the Middle East Respiratory Syndrome (MERS) outbreak last year.

As a result, Koreans are looking for bargains and good deals; the average Korean consumer is a very savvy spender.

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This causes aggressive discounting in Korea’s competitive e-commerce market. Coupang, for example, claims its diaper prices are the lowest in the country. Gmarket offers discounts of 50 per cent for first-time buyers.

Heavy discounting is likely not sustainable in the long term. Therefore content must differentiate, said Jiyeon Park, managing director at Starcom MediaVest Group Korea.

What Koreans like, and why

In a recent Social@Ogilvy survey, Koreans emerged as unlikely to share content online. Koreans are the least active sharers on social media; with only 57 per cent of users actively sharing content. When they do share, they largely focus on entertainment, politics and celebrities—not on why they support a particular brand.

Still, when a young Korean posts on Facebook that she is “shopping at a Hyundai Department Store” or “stopping in at Lotte on the way home”, she is still confirming these store brands as extensions of her patriotism, according to Meltwater research.

More than in perhaps any other market, the way to a Korean's heart is through their mobile phone. Here's a few examples of mobile-centric services that are helping brands provide genuinely better service:

• Syrup by SK Planet is a service that forms a virtual zone using GPS and delivers information and coupons for the stores located in the zone (known as Syrup Service Zone) to users of the app.
• Watcha is an app that recommends movies by analysing the grades given by consumers. Watcha-recommended movies are officially displayed in the search results of Google and recognised for their credibility.
• Naver adopted a strategy of locking users into the Naver platform by applying the ‘live’ concept in search, video, and shopping categories. In its search service, individually customised results are provided in real-time by analysing a user’s search intention, preference and location. Shopping categories are expanded to areas associated with daily living, such as real estate, restaurant reservations and even plastic surgery.
• Kakao’s strategy is similar to Naver’s: on-demand, ranging from ‘Kakao Taxi’ to ‘Kakao Bank’.

Even securities companies are starting to provide mobile trading services at low cost, where individuals can buy and sell stocks and mutual funds via mobile. Recently unveiled deregulation policies to promote financial transactions using mobile will contribute to the market growth, pointed out Jiyeon Yun, brand manager at Mirae Asset.

“Thanks to improved mobile engagement, e-commerce will remain a hot industry topic and is here to stay,” said Choi Ho, CEO of ISky Networks, a Korean electronics distributor. “It might even evolve further in unpredictable, organic ways to meet the needs of Korea’s increasingly discerning, demanding, tech-savvy and well-informed consumers.”

On the back of this, the mobile advertising market is anticipated to continue its high annual growth rate of 20 per cent, according to HMC Investment Securities. Mobile’s share in the internet advertising market is also expected to rise to 42.7 per cent. 

Entertainment or information

In Korea, like many other markets, we generally observe two major media-consumption patterns: entertainment and information-seeking.

Content will prevail over platforms in the future, said Steven Koh, MD of Wunderman Korea. It is important to provide content in the form of advertisements that are also enjoyable, he said.

With the advent of the information-seeking trend, existing advertorial formats are evolving into native ads that take into consideration media characteristics, advertising purpose and user-friendliness. A recent branded webtoon by Durex (pictured below) is a good recent example. 

The trend toward UCC (user-created content) has evolved into more specialised productions of 'PCC', where the 'p' stands for 'proteur'—an oxymoronic portmanteau of 'professional' and 'amateur'. This is aided by the intensification of what the industry calls 'one-man broadcasting', pushing content development all the way to the most professional level: RMC (ready-made content).

DJI, a brand of unmanned aerial vehicle technology, opened its first South Korean retail store in March, touting content creation as the reason. “With more and more people consuming video content on their mobile devices and the growing community of photographers and content creators, DJI sees Korea as a market with strong potential,” said DJI country manager Taehyun Moon.

Along with Instagram, the share of use of Korean startup Vingle, which sorts content according to topical interests, is growing. This indicates that it is important to provide image-oriented content as it resonates more with consumers, Wunderman's Koh said.

In particular, Koreans prefer local content over international content, according to Ferrero's Mirri. “The clear preference for locally developed content is what I would probably point out as a major factor that differentiates Korea from other Asian countries,” he said.

In light of that, Mirri said Ferrero has to go the extra mile to find the right way to convey the values of its products to strengthen local relevance. “We also put in effort to maintain our brand dynamism in the eyes of our consumers to ensure we keep up with their fast-paced lifestyles.”

Those fast-paced lifestyles have reinforced content ‘snacking’, such as during a commute or short break from work. A Nasmedia report predicts an increase in consumption of videos that are less than three minutes long. Their popularity is shown by view counts of such clips exceeding 80 million weekly (with mobile occupying 59 per cent of counts as of August 2015) according to SMR figures.

Amore Pacific, for instance, is already well-tapped into its target audience’s need for constant content, where the influence of “power bloggers”, celebrities and beauty content creators prevails over less-mature cosmetic markets in Asia.

It is all about information, and for sure, brands should always be ready in case consumers want to seek more information, Starcom's Park advised. “Architecture of content is a fundamental job to complete,” she said.

Brands must engage South Koreans on their level, in their own language, using their native communication platforms, and giving them the content they want, if they are to break that historical, deep-rooted gravitation towards local brands.