Ali, Temu, and Shein are making significant strides in entering the domestic market for Chinese e-commerce platforms (C-commerce). Until now, C-commerce has primarily functioned as a direct purchasing platform selling ultra-low-cost products from China. Recently, however, these platforms have begun to attract domestic sellers to establish their presence as shopping platforms. Industry analysts speculate that as the Trump administration's second term begins, leading to a decline in its business, C-commerce companies are looking to the Korean market as an alternative.
◇ Sell on Temu... C-commerce seeks Korean sellers
According to the retail industry on the 21st, the Chinese shopping platform Temu recently decided to open a marketplace (an online market connecting sellers and buyers) and has initiated recruitment of Korean sellers. This adds a local-to-local (L2L) business model, distributing Korean products directly in addition to its existing business of selling Chinese products to overseas consumers via direct purchase.
This is the first time Temu, which entered Korea in July 2023, is recruiting Korean sellers. To this end, Temu has been selecting personnel for key positions such as HR, administration, marketing, and logistics since late last year. Recently, it is known to have signed a long-term lease agreement for a large logistics center located in Gimpo and is pushing to contract with major logistics companies.
The existing Temu business model involves the headquarters purchasing products at low prices and handling sales and delivery. However, there is a growing possibility that business in the U.S. will become unfavorable due to President Trump's tariff policies. Until now, packages under $800 were exempt from tariffs in the U.S., but this exemption is expected to be abolished, along with an additional 10% tariff on Chinese products.
In response, Temu has decided to adopt a new policy encouraging sellers to ship products directly to the U.S. The Chinese fashion platform Shein has also suggested offering higher prices to companies transferring their production lines to Vietnam while extending delivery deadlines.
◇ Slowing Chinese consumption and U.S. Trump tariffs... Is Korea the alternative?
Industry analysts suggest that C-commerce companies have modified their business strategies along with changes in U.S. tariff policies, aiming to make the Korean market a viable alternative.
Orina, a research analyst at LS SECURITIES, noted, “If Chinese consumption slows and the U.S. market becomes less active compared to the past, there is a significant chance that Korea, having secured a monthly active user base (MAU), will become a primary target market. As C-commerce companies experiencing instability in the U.S. expand aggressively in Korea, domestic e-commerce competition may intensify.”
The proportion of Chinese products in Korea's overseas direct purchases increased from 49% in 2023 to 60% last year. The amount of direct purchases from China last year reached 4.7772 trillion won, marking a 48% increase from the previous year. Considering that most Chinese products are ultra-low-priced, this indicates that the volume of purchases was high.
With the activation of direct purchases from China, the MAU of C-commerce platforms has also increased. According to app analysis services WiseApp and Retail, the annual MAU of domestic e-commerce last year was ranked as follows: Coupang, AliExpress, and Temu. During this period, the estimated total payment amount of Ali and Temu reached 4.2899 trillion won, an 85% increase from the previous year.
The proactive entry of C-commerce, which has established its brand through direct purchases, is seen as a logical step. Professor Jeong Yeon-seung from Dankook University remarked, “To compete in the e-commerce market, diversification of offerings is necessary,” adding that “From the perspective of Ali and Temu, onboarding local consumers and sellers is likely a method to enhance the platform's credibility and trustworthiness.”
Prior to Temu, AliExpress entered Korea in 2018 through direct purchases and subsequently launched a dedicated Korean product section, 'K-venue', in October 2023, recruiting Korean sellers. The company announced plans to invest $1.1 billion (approximately 1.5848 trillion won) to build logistics centers in Korea and support the global sales of Korean sellers by 2026. Shein is also expanding its influence by launching specialized product lines for Korean consumers.
C-commerce is further expanding its influence by investing in domestic platforms. Last year, Korean fashion platform Abley secured an investment of 100 billion won from Alibaba Group and this month appointed Ray, the CEO of AliExpress Korea, as an outside director. Analysts suggest that Alibaba is gearing up to participate in Abley's management. Furthermore, AliExpress is expected to establish a joint venture (JV) with Shinsegae Group's e-commerce platform Gmarket in the first half of this year.
◇ Controversy over personal information breaches... Systemic improvements needed such as server transfers
In the past, C-commerce was perceived to have limited impact on the domestic market due to weak product competitiveness. It is said that the term 'Temu product OO' emerged as a mocking new term, implying that while the value for money is good, the quality is disappointing. However, directly distributing Korean products represents a different significance.
An official from an e-commerce company stated, “Selling Chinese products in Korea and operating a platform in Korea with capital investment are entirely different issues,” adding, “the latter presents a far greater threat.” Bom Kim, the chairman of Coupang Inc., which operates Korea's leading e-commerce platform, expressed concerns during a conference call last May that competition pressure would increase due to the entry of C-commerce.
However, there is also a perspective that sellers entering the platform now have one more option. Particularly, C-commerce, which operates on a global scale, can positively explore new markets merely by onboarding. In contrast, existing e-commerce platforms like Gmarket and Coupang provide reverse direct purchase services but are generally limited to the domestic market.
Nonetheless, the controversy over personal information leaks associated with C-commerce is noted as a risk factor for both sellers and consumers. Recently, reports confirmed that DeepSeek, a Chinese AI chatbot, transferred user information to ByteDance, the operator of TikTok, further increasing distrust toward Chinese applications.
Last year, AliExpress was fined 1.978 billion won for providing information about Korean customers to 180,000 overseas vendors, as revealed in an investigation by the Personal Information Protection Commission. The investigation results concerning Temu have not yet been released.
Particularly, Temu has recently announced that 'to provide efficient services, we entrust the processing of (Korean customers') personal data to third-party corporations, and if you refuse to allow the transfer of data abroad, you will not be able to use the service.'
Professor Jeong further stated, “Given that issues regarding the quality of C-commerce products and personal information security have been raised repeatedly, it is necessary to establish measures such as keeping the business's database server in Korea,” adding, “There should also be systemic improvements such as consumer complaint mechanisms and damage remediation systems.”