SOUTH KOREA MARKET SNAPSHOT
South Korea is one of the major exporters of electronic chips, semiconductors, smartphones, automobile and shipping industry worldwide. Recent annual GDP growth in Q2 2019 is recorded at 1.1% versus 2.8% in Q2 2018. The economy has been adversely affected due to the ongoing US-China trade dispute. Currently, government spending is on rise to combat pressures from reduced export earnings on account of lower demand in electronics.
The smartphone and internet enabled eco-system in South Korea makes it a leading contender for staging e-commerce disruptors supported by digitally savvy consumers (97%) for online purchasing. Fashion and apparel enjoy highest popularity with 70% of consumers purchasing online, closely followed by books & music (63% of online consumers) and beauty & personal care (56% of online consumers).
As a vast majority of consumers have realised the convenience and ease of e-commerce, it is no surprise that South Korea is leading online FMCG sales at 18% share of the total FMCG. South Koreans are increasingly seeking food options that are healthy and their preferences are becoming diverse as more imported fresh food is available in the market. According to survey findings, 44% of consumers have bought fresh groceries online in 2018 (up 4% in 2017) and 42% of consumers have ordered food online via restaurant deliveries or ready to eat meals (up 7% in 2017).
In context to FMCG offline retail, convenience stores are contributing to a quarter of total FMCG sales across retail with 7.3% sales growth in Q1 2019. While the total FMCG value is stable compared to the previous quarter, significant growth is recorded in packaged food categories such as beverages (up 5.4% at 6.7% share of FMCG) and canned food & meals (up 4.7% at 17.2% share of FMCG) in Q1 2019.
In a study that analyses South Koreans’ preference towards brand loyalty, findings reveal that nearly a third of consumers (32%) say they are highly brand conscious while purchasing products such as coffee and tea, followed by 27% of consumers sticking to one or two brands while purchasing skincare and another 26% consumers in favour of select shampoo and hair conditioner brands. Online availability can influence over half of consumers (53%) to switch brands, aside from the other influencers, i.e. trust, convenience and pricing that prompt active brand switching among consumers.
The online FMCG market in South Korea is five times more competitive than offline FMCG, and performance studies across 70 categories reveal that four out 10 brands are successful both online and offline, being dominated by small to medium sized manufacturers that target select consumers and address their needs. The mantra for success in ‘online shopping mall’ is very different from in-store shopping, in the online space consumers are seeking better search experience, trendy product line-up and overall convenience—not standalone pricing.
With rising popularity of Korean pop culture and films worldwide, consumers from international markets such as those in Asia are excited about skincare and beauty brands from Korea. Looking ahead, going global will be the new philosophy for South Korean retailers and manufacturing companies where they can replicate success stories from online business experience and consumer engagement from home turf.