Characteristics of South Korea’s distribution system
Goods distribution channels
In South Korea, goods are distributed/retailed through many different channels such as department stores, convenience stores, and supermarkets, etc. However, the retail distribution system in South Korea is undergoing changes. In particular, the traditional retail distribution networks of small family-run stores, stalls in markets and street vendors are being replaced by large discount stores; online shopping via social platforms and e-commerce websites is also becoming increasingly popular. In 2021, despite the severe impact of the COVID-19 pandemic, retail sales in South Korea still increased by 11.3%, mainly due to a significant increase in online sales during this period.
Table - Some types of retail distribution in South Korea
|
Type |
Characteristics |
Popular brands |
|
Department stores |
Clothing, cosmetics, jewelry, leather goods, food, restaurants. |
Hyundai, Shinsegae, Lotte, Daegu Department, Galleria, Aekyung, IPark |
|
Supermarkets and hypermarkets |
Food supermarkets and specialized department stores |
Lotte Mart, Homeplus, Homever, E-Mart, Kim's Club |
|
Convenience stores |
Open 24/24 General food, drink, everyday products |
7-Eleven, Family Mart, GS25, Ministop |
|
Drug Stores |
Drugs, personal hygiene products, cosmetics, skincare products |
With Pharm, OptimaCare |
Source: Santandertrade, 2023
Korean's criteria for choosing consumer products is convenience and speed. For this reason, online shopping is increasingly growing in South Korea and has become one of the strongest retail channels in this country. To adapt to shifts in customer consumption trends, retail groceries have adopted omnichannel strategies to serve both online and in-person shopping of consumers.
In fact, South Korea is the third biggest e-commerce market in Asia. The most popular types of items purchased online are clothes and electronics. Popular shopping applications/sites in Korea include eBay Korea, Amazon, 11Street, Coupang, Auction, G-market, Ticket Monster (TMON) and We Make Price. Online purchases from foreign retailers have increased rapidly as Koreans could find many items with cheaper prices (even including freight and import tariff) on foreign websites.
Although offline stores are losing their ground, convenience stores still establish their position with convenience. In South Korea, the high density of convenience stores indicates that they are highly accessible and thus become favored by consumers looking to quickly pick up some grocery items. Also, convenience stores aggressively developed creative products and services in order to attract frequent consumer visits to the outlets.
Import channels
Imported goods can enter the Korean market through a variety of channels depending on the type of product, financial considerations as well as other factors such as market size, demand and long-term sales potential of the good, etc.
The following are some channels for importing foreign goods into South Korea:
• Through a commercial presence in Korea
Foreign companies establish a trade presence in South Korea (foreign invested enterprises, business cooperation contracts, branches, representative offices, etc.) to import, distribute to wholesalers, agents, stores, or directly sell to consumers.
Establishing a commercial presence to import goods into South Korea is considered a direct and effective channel to access Korea’s market, but it requires more capital investment than other forms, and establishment procedures also requires more time and cost. Therefore, this form is suitable for large companies with high transaction volume and want to develop long-term in the Korean market.
• Through import partners in South Korea
Import partners can be units that purchase goods for their direct use (large and valuable industrial equipment; raw materials for production; etc.) or specialized import units (professional importers) that import to redistribute in the Korean market.
Korea's specialized import units are mainly wholesalers, distributors or intermediaries who import goods for redistribution to stores, supermarkets, other units in need. Goods imported through these professional importers are usually small machinery and equipment, common industrial supplies and consumer goods, etc.
• Through online shopping channels
Foreign suppliers can also sell directly to Korean buyers through e-commerce channels such as Amazon, Ebay, etc. This form is becoming increasingly popular in South Korea for purchasing international goods, however, it is only suitable for consumer products.
Source: Center for WTO and International Trade
