Social commerce is easily one of Korea’s fastest growing industry segments, changing how businesses online are shaping up. Korea’s largest social commerce site Ticketmonster just recently announced that they just surpassed KRW 10 billion (USD 8.8 million) in revenues since its launch in May 10th 2010. It has only been 8 months since the first social commerce site in Korea named Wipon launched, and now there are already more than estimated 140 similar service providers in Korea. Social commerce market in 2010 is estimated to be approximately KRW 50 billion (USD 44 million USD), with the next year’s projection being 4 times the size at KRW 200 billion (USD 176 million). Social commerce dynamics in Korea differ from how it is in the US where the industry was defined by Groupon.
Roughly half of the South Korean population is focused in Seoul and the state of Gyeonggi, a state surrounding the nation’s capital. Because of this, most of the newly-open social commerce sites provided discount deals within Seoul. This naturally called for severe competition that resulted in lowered commission and steeper discount deals made possible by subsidization from the websites. During August and September of this year the industry average for commission collected by Korean social commerce companies was around 10% as opposed to 50% collected by Groupon in the States. It was not uncommon to subsidize further discounts by a shaving off a few percentages. Cutthroat competition amongst social commerce sites still ensues, but despite this there are over 140 sites in operation.
So what does the market look like now? Rankey, a Korean web statistics authority ranks social commerce sites as shown below.
Social commerce sites pursued various strategies. Ticketmonster, for example, focused primarily on regional expansion to capture as much market share as possible not just in Seoul but in other cities such as Daejeon, Busan, Incheon and Bundang. They now boast more than 300,000 members. Website such as FamilyCEO targeted housewives and mothers to target family-friendly deals for example at family restaurants. WeMakePrice broke record daily sales by selling KRW 1.5 billion (USD 1.2 million) worth of Everland (Korea’s most popular amusement park) entry tickets to 150,000 customers on its first day. ShowKingOn primarily focuses on services for women such as skin care, nail care, spa and massage treatments. There are even sites that specialize in selling dairy and meat products. DreamDeals offer discount deals offered in English for English-speaking demographic in Seoul.
Deal aggregating sites emerged in the last few months that consolidated discount deals. Several fans of the benefits social commerce has to found themselves no longer checking a list of 10 websites that they were keeping in track; instead they would visit the aggregators, or meta-sites as they are known in Korea, such as Pumpl, Couponmoa, or Haroohana. The aggregator sites started to become popular because of a simple reason: users simply want to check out as many deals as possible in one website without having to enter a hundred different URLs. There are already estimated 30 or so aggregator websites in Korea.
Realizing the potential market of social commerce, Internet giants of Korea are slowly gearing up. SK Communications, the company behind Cyworld, Korea’s largest social networking site, announced recently that the company will leverage 25 million registered Cyworld users and 32 million registered users of NateOn, a free online instant messaging platform, to launch a social commerce website. Korea’s Internet ticketing leader Interpark also launched its own social commerce service titled Halftime, and a distribution giant Shinsegye and yet another corporate giant Woongjin launched similar services. It is yet to be seen whether the giants can clear out much of the fragmented market in Korea.
Due to severe competition destroying already-thin profit margins, most of the social commerce sites are not profitable. It is therefore expected that most of the smaller websites will clear out by 2011.
The biggest question is: who will be leading the pack by the end of year 2011? Ticketmonster, Wemakeprice, Coupang, and Dailypick definitely make it to the top of the list. However looking at the speed at which the industry is growing, a brand new site can end up at the top. And wild cards of social commerce in Korea are the aggregators. An aggregator that provides more than just a listing of deals could prove itself to be competitive in the saturating market. A social commerce portal that centralizes coupon purchasing and management system for different social commerce sites can be a game changer in the industry.