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Korean Times / Tech - Game

Why does Amazon not set up office in Seoul?

U.S. retail giant cares more about China, Japan

By Lee Min-hyung

Amazon has remained passive in its expansion into the Korean market, keeping a low profile over the establishment of its e-commerce branch office here.

This is in contrast to the firm's strategies taken in neighboring Asian countries, such as Japan and China where Amazon has gone all-out to compete against its local counterparts.

Some may point out that Korea's weaker purchasing power, compared to the two Asian economic giants, held back Amazon's appetite for the country's market.

But market experts said Korea might not look as appealing as other markets for Amazon because the country boasts one of the world's fastest delivery services. On top of that, they also noted Korean e-commerce has little room for growth unless any potential newcomers push ahead with very innovative business tactics.

This is because of Korea's decades-long e-commerce history, allowing anyone to buy anything online via local e-commerce platform operators such as 11st and Auction.

"Amazon's two competitive edges come from its fast delivery and diverse product lineups ranging from very small electronic parts to complete goods," an e-commerce industry source said.

"The two strengths, however, will not come as any surprise to Korean customers, as local players have for years fulfilled the needs here like Amazon does in its major marketplaces."

Amazon is on track for rapid global expansion. There are rumors the U.S.-based e-commerce and cloud computing giant is set to open a commerce-dedicated office here soon.

In 2013, Amazon established its Korean branch for its Amazon Web Service (AWS) cloud computing platform. The company also runs its Global Selling service, allowing local users to sell their products to U.S. customers. But the firm's representative merchandising platform has yet to land here for unconfirmed reasons.

"EBay Korea brought success to some extent here, but this came largely from its acquisitions of local counterparts Gmarket and Auction," the official said. "In its initial stages, the company failed to make successful inroads into the Korean market due to its weak differentiation points. Things will not be different for Amazon's e-commerce unit."

He cited the failures of other overseas e-commerce giants here.

"Groupon started its service here in 2011, but the social commerce giant withdrew in 2014 after failing to localize its services," he said. "In contrast, other Korean online commerce startups such as Coupang and Ticket Monster rapidly expanded their presence here by pushing their own differentiation marketing strategies."

For Amazon's commerce business to succeed here, the company may have to either acquire a local merchandising giant or adopt a localized and differentiated tactic, he said.

Another official from the local retail and merchandising industry said Korea would definitely be a tough market for Amazon, as it would face fierce competition from the saturated e-commerce industry here.

"Amazon is undoubtedly one of the world's largest and most tech-savvy merchandising players," he said. "For now, Amazon looks to put more focus on attracting Korean sellers for its global customers. But the company could pose a serious threat to its local competitors, if it pushes revolutionary and innovative attempts here encompassing online and offline. Mergers and acquisitions can be one of the options."