FM 424 South Korea

Cross-border shoppers

Cross-border online shopping by Korean consumers continues to grow rapidly Making direct purchases from foreign businesses online has become a new pattern of consumption in Korea.

Open market

Open market, one of the online retail forms in Korea absorbs small and medium-sized on/off-line retailers

Peter Drucker

Peter Ferdinand Drucker was an Austrian-born American management consultant, educator, and author, whose writings contributed to the philosophical and practical foundations of the modern business corporation.

Type of government

Presidential Republic

religion and ethnicity

31% christian, 24% Buddhist - Homogenous ethnicity

Age structure

46% is 25-54 years old

Population

50,924,172 - 51 million

GDP

$1.929 trillion

Technology and Consumer Demographics

- According to The Wall Street Journal, Korea ranked first in the world for high-speed internet penetration - Over 50 percent of online shopping mall revenues were made using mobile shopping - Korea is currently experiencing two significant demographic changes: the growth of both single-person households and the senior population.

Four social factors that influence the Korean retailing industry:

- Culture - Government policy and regulation - Technology - Demographics

Consumers: Growing Income

- Distinguishing features include: 1. Growing income level with highest disposable income of young consumers 2. Baby boomers are also called active seniors or new seniors because they are very interested in fashion and trends and want to stay young 3. Growth of fashion consciousness among men and women, a willingness to experiment with fashion 4. Increased exposure to social media and other international media 5. Increased foreign travel

About South Korea

- Is a highly urbanized nation located in the southern part of the Korean peninsula in East Asia - The entire population of the nation is estimated at around 48.58 million, 82.5 percent of which is comprised of urban residents - It is the fourth-largest economy in Asia and eleventh-largest in the world.

South Korean Consumers

- Korean consumers focus on themselves and seek self-enhancement value - Rational consumption behaviors are especially prevalent among consumers in their twenties - Korean consumers are living in the digital age. The penetration rate of cell phones is 98 percent in Korea

Apparel Retail Formats: Malls Taking Over Old-Fashioned Shopping

- Modern formats 1. Hypermarkets and supermarkets 2. Department stores 3. Discount concept stores and outlets 4. Shopping centers and malls 5. Single brand apparel stores 6. Internet

Emerging trend in South Korea: Cosmetic retailing

- Multi-brand cosmetic shops are expanding their presence in Korea. - South Korea is one of the world's most exciting and fast-paced beauty markets, introducing industry-leading innovations and setting trends globally.

Distribution Channel:

- Online retailing has registered the fastest growth among all distribution channels for cosmetic retail in South Korea - Key drivers of the growth of the Korean cosmetics industry are the innovation of product development and consistent investment into R&D over the last few decades

Online Retail Market

- South Korea has the third largest online retail market in Asia Pacific, afterChina and Japan - Online retail transaction value increased by 16.1 times in 2015 compared with 2001 - Since mobile shopping increased faster than internet retailing, the mobile transaction value increased strongly to account for a 45.4 percent share within overall internet retailing in 2015.

Social factors that influence the Korean retail industry

-The Korean culture is transitioning and becoming more individualized and westernized, especially among the younger generation - The policy "the liberalization of the Korean retailing market" brought revolutionary changes to the Korean retailing market

The lifestyle of Korean consumers can be described in three keywords:

1. Individualism 2. Rationalism 3. Digital

Online Retail Market Drivers

1. Open market 2. Social commerce 3. Cross-border shoppers

3 Biggest Cities

1. Tokyo 2. Shanghai 3. Sao Paolo

investing in South Korea cons (3)

1. foreign investors and expat employees wanting to do business in South Korea are expected to adjust and conform 2. although gender relations are becoming more equitable, men still dominate the Korean workplace 3. personal relationships, hierarchy and saving face are all major factors in the Korean work environment

investing in South Korea pros (3)

1. large, free market economy is the fourth largest economy in Asia and the 11th largest in the world (50 million) 2. incredible economic growth and global integration to become a high-tech industrialized economy 3. highly motivated and educated populace is largely responsible for spurring the country's high technology boom and changing buying and consumption patterns

Capital

Seoul

Social commerce

Social commerce in online distribution market has been centered on a "C2C (Consumer to Consumer)

Just in Time

belief and practice that having the parts on hand to be made when necessary and not until then

Growth rate of Retail formats

discount stores, non-store based retailing and convenience stores are still growing

export commodities

semiconductors, petrochemicals, automobile/auto parts, ships, wireless communication equipment, flat display displays, steel, electronics, plastics, computers

South Korea notes from class - beauty

• Beauty is one of the biggest industries in Korea • Spend billions of $$ on beauty components • Cheaper procedures in Korea • Applies to men as well - almost spend more money on beauty products than any other country and male population is small compared to other countries

South Korea notes from class

• Is Korea an emerging nation? - not really anymore • Korea has come very far very quickly and is only recently listed in our textbooks • Korean war was 1950-1953 - country was so poor it would make Bangladesh look rich and began as a true emerging nation and started in the apparel industry • South Korea was primarily agriculture before the war and then began to build factories for apparel - build and owned by Chaebols (family owned companies) e.g. Samsung, LG, etc. • Relatively small with a large population of about 50 million people • Retailing is similar now to us in the US - malls all over, most of the large retailers are part of the Chaebols • Seoul is just like NYC with Koreans, but from a technological standpoint they are ahead of us • Most people live in huge high rises which could be 40-50 floors • Most buildings are radiant heating - heating from floor up, comfortable to walk around barefoot • If they say yes to something, they will do everything in their power to live up to that and follow through • Proud of the work they produce, including automobiles • On the border with North Korea - demarcation line is 30 mins outside of Seoul - like having #1 enemy right on border - very close and serious • Very good chance that management of factories all over the world are Korean • All males are drafted into the army in Korea for two or three years - can't get out of it, it is hell • Karaoke • Male dominated society • If you get into the right university, you are set and its the most difficult time of your life are your last year high school examinations and once in the school you don't have to study as much