Overseas direct purchases increase while reverse direct purchases decrease... "Export support measures needed"

Overseas Direct Purchases Increased by 50.0% in the First Half of This Year
Overseas Reverse Direct Purchases Decreased by 57.7%
FKCCI "Need for New Digital Trade Response"

Overseas Direct Purchase and Reverse Direct Purchase Trend Graph / Source=Federation of Korean Industries

[Asia Economy Reporter Kim Pyeonghwa] Despite the increase in the scale of e-commerce following the spread of COVID-19, the scale of cross-border e-commerce has decreased. This is due to the fact that while the export indicator, reverse direct purchase (RDP), has decreased, the import indicator, direct purchase (DP), has increased to 2.5 times the size of RDP. Accordingly, there are calls for export support measures to increase the scale of RDP.

According to an analysis of Statistics Korea data by the Federation of Korean Industries (FKI) on the 1st, the total e-commerce (online shopping transaction amount) in the first half of this year was 99.7 trillion KRW, a 54.3% increase compared to 64.6 trillion KRW in the first half of 2019. On the other hand, during the same period, the scale of cross-border e-commerce (overseas direct purchase amount + overseas direct sales amount) decreased by 15.9%, from 4.4 trillion KRW to 3.7 trillion KRW.

Cross-border e-commerce refers to a method where consumers and sellers in different countries trade goods directly through electronic platforms such as the internet without going through local distribution stages. It is divided into overseas direct purchase (ODP), where domestic consumers directly purchase and import from overseas sellers, and reverse direct purchase (RDP), where overseas consumers directly purchase and export from domestic sellers.

The FKI explained that while the export indicator, RDP, decreased by 57.7% from 2.6 trillion KRW in the first half of 2019 to 2.7 trillion KRW in the first half of this year, the import indicator, ODP, increased by 50.0% from 1.8 trillion KRW to 2.7 trillion KRW during the same period, resulting in a decrease in the scale of cross-border e-commerce between countries. They also noted that since the first half of last year, the scale of ODP surpassed RDP, putting cross-border e-commerce in a deficit state. As of the first half of this year, the scale of ODP was 2.5 times that of RDP.

Overseas Direct Purchase Amount Changes by Region / Source=Federation of Korean Industries

The scale of RDP centered on China has been steadily growing. As of the first half of this year, 69.8% of domestic RDP occurred in China. On the other hand, Korean direct purchases by Chinese consumers (RDP from Korea’s perspective) steadily increased but have been declining since the second half of 2020 due to the contraction of online duty-free shops caused by the spread of COVID-19. As a result, the scale of RDP to China in the first half of this year was 749.7 billion KRW, a sharp drop of 65.9% compared to 2.199 trillion KRW in the first half of 2019, just before the spread of COVID-19. Direct purchases by domestic consumers from other regions such as the United States and the European Union (EU) are also on the rise.

Yoo Hwan-ik, head of the Industry Division at FKI, said, "Cross-border e-commerce is a new form of digitalized trade and a rapidly growing sector that can overcome the limitations of a small domestic market and provide new opportunities for small and medium-sized enterprises as it does not require local distribution stages," adding, "it is necessary to support overseas consumers to easily access and purchase from Korean sellers to attract demand from overseas consumers.”

He continued, "To secure a leading position in the global e-commerce market, export support policies such as expanding customs offices that allow list clearance exports (a method where customs clearance is possible by submitting only an invoice without formal customs procedures) and negotiating simplified customs procedures with neighboring countries with many potential consumers, such as ASEAN countries, are needed," adding, "In the future, opening e-commerce export-import data is also necessary to establish e-commerce export support policies.”

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