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The Peninsula

E-commerce Start-ups Respond to the Pandemic

Published September 20, 2021
Author: Korea View

What Happened

Implications: The South Korean market proved capable of adapting to unanticipated external challenges. In response to social distancing rules established to curb the spread of COVID-19, the domestic e-commerce sector in South Korea expanded to meet market demand under these conditions. While the year-to-year change in online purchases was larger (44%) in the United States, South Korean e-commerce companies secured 26% of total domestic retail sales in 2020. By contrast, U.S. counterparts only claimed 14% of total sales in their home market. High penetration of smartphones and tech-savvy consumers helped the Korean e-commerce sector thrive in this adverse environment. According to the Ministry of Science and ICT, 99.5% of Korean households have access to the internet via mobile phones, personal computers, or other gadgets. Entrepreneurship also played a role in bringing new agile service providers into the marketplace.

Context: The Korean government has always claimed that it prioritized the growth of small and medium enterprises (SMEs). Demand for e-commerce creates new opportunities for these non-conglomerate actors to play a bigger role in the market. However, tech SMEs have faced headwinds in the past as public policies aimed at protecting workers or the consumer market placed a greater onus on smaller businesses vis-a-vis larger market actors. Simultaneously, existing social inequities impose a ceiling on potential consumer demand in the e-commerce space.

This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here.

Korea View was edited by Yong Kwon with the help of Marina Dickson, Yubin Huh, and Janet Hong. Picture from the Wikimedia account of Y P

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