Unexpected Factors Driving Mobile Commerce Boom in Korea –

Overall foot traffic to many mall-based retailers has been declining for years, and according to local media in Korea, apparel store traffic hit its lowest mark in 17 weeks in mid-June thanks to the MERS panic. Prior to that, overall domestic demand has been dropping in proportion to rising household debt and global economic uncertainty. With the threat of MERS, households seemed to tighten their wallets.

However, the decline of the Korean pastime of shopping at the mall isn’t necessarily a bad sign for other businesses. While most mall-based retail businesses struggle to survive the declining economy, online transactions and mobile shopping are thriving. Everyone knows that e-commerce is a constantly-growing segment of the larger retail and commerce landscape, but most probably don’t know that mobile commerce is growing at an even faster rate.

According to the Korea Chamber of Commerce & Industry (KCCI), South Korea’s mobile market has more than doubled in value every year since 2010. Using smartphones to buy products and services has become so commonplace that it represents nearly one-third of all web-based sales. In a 2014 study, Bloomberg estimated that the mobile market would reach 800 percent growth by end of 2015, compared to the initial period.

The proportion of sales from mobile shopping to all web-based shopping continues to rise, too. The turnover of online shopping during Q4 last year was 12.7410 quadrillion won (US$11.1378 trillion), a 21 percent increase from the same period the previous year. In Q1 2015, the proportion of the turnover of mobile shopping to that of all web-based shopping was 107 percent, which translates into an increase of mobile shopping and a turnover of 4.8760 quadrillion won (US$4.2636 trillion). In comparison with Q4 2014, the turnover of all web-based shopping in Q1 2015 increased by 11.3 percent, while mobile shopping increased by 24.9 percent.

Among several local companies, Coupang and Wemakeprice are prominent in devoting a large proportion of their business (80 percent) to mobile shopping. Other mall-based retailers are scrambling to adapt to the changing landscape of the retail industry.

According to local weekly magazine Maeil Kyung (MK), in the case of Homeplus, the proportion of mobile sales to all web-based sales rose to over 50 percent in April last year. Sales revenues from mobile shopping marked a 112 percent increase from the previous year. The number of app downloads reached over 4 million.

Mobile Behavior

But why is mobile shopping growing so quickly? To better understand these trends, one needs to understand the behavior of people doing mobile shopping. For instance, it turns out that consumers look primarily to their phones to shop for clothing and fashion-related products (72.3 percent), household goods and diapers (44.8 percent), car accessories (30.1 percent), consumer electronics (30.3 percent), and communication equipment (27.6 percent).

The most common method of payment for mobile shoppers is paying by credit card (53.2 percent), followed by so-called simple payments or a specific app-based payment method (16.3 percent), paying by debit card (14.5 percent), paying via phone bill service (8.4 percent), and wire transfer payments (7.6).

Another insight into this trend is the important distinctions between mobile shopping behavior and online or in-store behavior, especially among women.

Mobile-channel shoppers have a distinct demographic in South Korea. According to data compiled by MK, women account for 60 percent of transactions. Additionally, most are in their 30s and are likely to have preschool children.

They are also, somewhat surprisingly, likely to be full-time housewives. There has been a widespread assumption that mobile shopping is dominated by busy working moms. In fact, working moms spend more time in front of a PC, mostly at work, while housewives are more likely to use their smartphones to shop.

In contrast to the bargain-searching mentality that dominates online shopping, mobile shoppers prioritize intuitively easy search and convenient shopping experiences. According to research conducted by Mckinsey & Company, more than 60 percent of South Korea’s mobile shoppers cited convenience as their top priority, compared with 44 percent of online shoppers. Mobile shoppers want quick satisfaction. Their purchasing decisions are often governed by impulsive or emotional factors – which encompass product categories including apparel, fashion accessories, and shoes – or habit, such as buying groceries and kid/baby items.

Companies like Coupang have noticed this trend, and have aggressively targeted mobile-savvy young moms by offering baby gear such as diapers at low prices in their mobile app. In addition, by launching its own delivery system called Rocket Delivery in 2014, Coupang has been able to provide faster delivery services for its shoppers at no additional charge. “We introduced Rocket Delivery to send goods to customers in a faster and safer manner across the country. This revolutionary service has greatly boosted customer satisfaction,” a Coupang spokesman said. The company currently operates eight warehouses across the nation and employs about 1,000 delivery people to realize the fast and convenient shopping experience for regular customers.

Other retailers, both online and offline, could take notes from the current booming m-commerce market in Korea. Namely, it is essential to note the unique demographics and characteristics of the majority of mobile shoppers who drive the boom in mobile commerce in Korea. Also, one should note that fast, convenient delivery is an integral part of a successful business strategy.

 

[“source – businesskorea.co.kr”]