Open Market·Live Commerce... Portals Swallowing 'Distribution'

Naver's E-commerce Territory Expansion
Kakao Joins... Shaking the Distribution Market
Department Store Services Available Only on Own Apps

Lotte and Shinsegae's Digital Transformation
Cannot Keep Up with Sales via Naver Shopping

[Asia Economy Reporter Seungjin Lee] Naver and Kakao are expanding their e-commerce territories, threatening not only department stores and large supermarkets but also home shopping channels. As major retailers accelerate their 'digital transformation' from offline to online, the market is at risk of being entirely overtaken with Naver dominating the search platform and Kakao controlling the mobile messenger market.

◆ 'Live Commerce' Already Dominated by Portals = On the 13th, major domestic retailers are expanding 'live commerce' in response to the spread of contactless consumption culture due to COVID-19. Live commerce refers to broadcasts that sell products through real-time streaming on mobile applications or the internet. It is a kind of home shopping.

Lotte Department Store launched the live commerce broadcast '100live' in December last year. 100live showed an upward trend after COVID-19, recording over 100,000 views per month on average. In January this year, the dedicated live commerce team was expanded and reorganized, increasing the staff from 3 to 20.

Shinsegae established the video content production and streaming company 'Mindmark' in April with an investment of 26 billion KRW. This company plans to cooperate with SSG.com, which handles Shinsegae Group's online business, to sell products from Shinsegae Department Store, E-Mart, and others through live commerce.

However, the live commerce market has long been dominated by Naver. Naver supports live commerce functions for 320,000 sellers on its Smart Store platform. Unlike retailers who require separate apps, Naver provides the service within its portal app, offering superior consumer accessibility.

Because of this, many consumers choose Naver over Lotte On or SSG.com. Consequently, Hyundai Department Store reversed its plan to offer live commerce through its own app and decided to partner with Naver to operate 'Department Store Window Live,' showcasing department store products via online real-time video.

Recently, Kakao has also entered the live commerce market. Kakao Commerce launched the beta service of 'Kakao Shopping Live' in May. Considering that live commerce closely resembles home shopping, it is expected that home shopping companies' market share will significantly shrink in the long term.

◆ Lotte and Shinsegae Also Join Naver Shopping = Lotte invested a total of 3 trillion KRW in its online shopping platform 'Lotte On.' SSG.com is accelerating its digital transformation by investing hundreds of billions of KRW to build logistics centers and introduce dawn delivery. However, Naver's launch of 'Brand Stores' has narrowed their market share.

Naver offers a '24-hour delivery guarantee' service, a type of fulfillment, through Brand Stores where famous brands directly participate. In collaboration with CJ Logistics, orders completed before 11:30 PM are guaranteed next-day delivery. Unlike traditional retailers who must invest in logistics centers, Naver builds only the platform and provides logistics services through partners. Starting with LG Household & Health Care, 200 Brand Stores are expected to open this year.

Given this situation, products from Lotte On and SSG.com are increasingly sold through Naver Shopping. There are forecasts that Naver will become the largest retailer in Korea once the Brand Store business fully takes off.

◆ Need to Resolve Discrimination Against Existing Operators = Assemblyman Kyungman Kim, a member of the Industry, Trade, Small and Medium Enterprises Committee, has introduced a bill to partially amend the 'Act on Fair Transactions in Large-scale Distribution.' The bill includes e-commerce companies such as Naver and Kakao as 'large-scale distributors.' If passed, e-commerce companies, which were previously not classified as large-scale distributors, will be subject to penalties such as fines or business suspension for unfair trade practices against small and medium-sized sellers, similar to TV home shopping channels.

Professor Ikseong Kim, Honorary President of the Korea Distribution Science Association (Dongduk Women's University), commented on Naver's shopping business expansion: "From the perspective of enhancing consumer benefits, it seems difficult to block Naver's shopping business expansion. Regulation alone is not the solution, but if there is discrimination against existing operators, a basic framework to protect them should be established."

This content was produced with the assistance of AI translation services.