Alibaba’s international arm invests millions into South Korea expansion

BEIJING — Alibaba‘s international e-commerce business AliExpress is spending the equivalent of $7 million to reach consumers in South Korea, the unit told CNBC in an exclusive interview.

AliExpress said it launched three-to-five-day shipping to South Korea last year, allowing South Korean residents to buy some products, especially in fashion, from Taobao. That’s Alibaba’s main e-commerce site in China.

In all, the business unit said it spent 10 billion won this year in South Korea to lower product prices. The company wants to “make sure we have the best pricing,” said Gary Topp, European commercial and marketing director at AliExpress.

The investment looks to tap a market that’s valued at billions of dollars, and currently dominated by the U.S.

South Koreans’ online purchases from foreign retail sites grew by $1 billion in 2021 to $4.5 billion, with 41% stemming from the U.S., according to a report in August by the U.S. International Trade Administration.

“Although in 2020, the United States was ranked number one, other countries such as China are expanding their presence in the Korean e-commerce market,” the report said, noting South Korean consumers are now buying from more than 30 countries.

From January to September this year, the number of AliExpress app users among South Koreans increased by 22%, Seoul-based independent data analytics company TDI said.

That brought monthly active users in South Korea to a record 2.72 million in September, TDI said.

AliExpress said it didn’t comment on third-party data.

Gross merchandise volume in South Korea rose by 44% last year, and the number of buyers grew by 50%, Zhang Kaifu, vice president of Alibaba and General Manager of AliExpress, at a conference in April. The company confirmed the data, which didn’t include monetary amounts. GMV measures total sales value over a certain period of time.

In August last year, AliExpress was already one of the top five sites most-used by South Koreans for buying products directly from overseas sellers, according to the Korea Consumer Agency, a government agency. The other sites were Amazon, iHerb, eBay and Q0010.

In past years, AliExpress focused primarily on reaching the European market. Public disclosures about subsidies focused on making it cheaper and faster for consumers in Spain, France and other European countries to receive packages.

As the company geared up for its big November shopping festival — the Singles Day shopping event leading up to Nov. 11 — it said it will be offering two-day local delivery to customers in Spain and France. This fall, AliExpress began rolling out interest-free installment payment plans for customers in Europe.

Alibaba said in the quarter ended June 30 that revenue from its international commerce retail business fell by 3% year-on-year to $1.57 billion due primarily to challenges in the European market, such as the depreciation of the euro against the U.S. dollar and new EU tax rules.

During the same quarter, the company’s China commerce retail business saw a 2% year-on-year decline to $20.45 billion. The period was hit by Covid-related disruptions to logistics and supply chains.