E-commerce companies are jumping into affiliate marketing one after another. Affiliate marketing refers to a form of marketing in which internet creators share links to recommended products in their social media posts and, when sales occur through those links, receive a portion of the revenue as compensation.
According to the retail industry on the 30th, major e-commerce companies are actively adopting affiliate marketing. Coupang, a powerhouse in Korea's e-commerce market, moved early into affiliate marketing through "Coupang Partners" in Jul. 2018, and in Jul., Naver launched "Shopping Connect," followed by CJ Olive Young's official launch of "Shopping Curator" in Aug., adopting affiliate marketing.
Naver's "Shopping Connect" is a solution in which Smart Store sellers and creators collaborate to promote and sell products and share revenue based on sales performance. The sales revenue is determined by the product commission described by the seller (starting at a minimum of 1.8%). The company said sellers and creators can generate revenue stably, adding that during the beta test period from April to June this year, more than 520,000 products were linked to Shopping Connect, and there were creators who generated more than 100 million won in revenue.
Olive Young's "Shopping Curator" pays up to 7% of the sales amount as content revenue if a purchase occurs within 24 hours after clicking the link. In addition, if the recommended product is purchased directly from the link, it pays 7%, and if the link is used but a product other than the recommended one is purchased, it pays 3% in revenue.
"Coupang Partners" allows members to post purchase links on online communities and social media they operate, and if a person who clicks the link purchases the item within 24 hours, it settles 3% of the purchase amount. According to Coupang, it is known that there are people who earned 150 million won in annual income through this program.
Amazon, the world's largest e-commerce platform that Coupang is known to have benchmarked, also operates the "Amazon Associates" program. The commission rate ranges from 1% to 10% depending on product category, such as 1% for groceries and 10% for luxury beauty.
In addition, Today's House is operating an affiliate program called "Curator," and Shinsegae Group's fashion shopping mall "W Concept" and the cosmetics shopping mall "Hwahae" have also recently moved to adopt affiliate marketing.
The growing adoption of affiliate marketing in the e-commerce industry aligns with the trend of declining search (intent-based) shopping and increasing discovery-based shopping. According to NielsenIQ, 27% of consumers felt the need to buy after seeing "user reviews and promotional content by ordinary people and influencers on social networks." In other words, personal recommendations act as a powerful purchase driver.
Because revenue is shared when sales occur, companies benefit from a lower burden of initial investment expense. For participants, they can earn revenue based on performance, to the point that some take it up as a side job.
According to Forbes, affiliate marketing accounts for 16% of e-commerce sales. Accordingly, overseas, specialized agencies that connect internet creators with online shopping malls are also active. According to market research firm Business Research Insights, the global affiliate marketing market was $17.422 billion (about 2.44012 trillion won) as of last year and is expected to grow to $62.7 billion (86.8176 trillion won) by 2033.
An e-commerce industry official said, "Affiliate marketing is being introduced more quickly because it draws voluntary participation from users and can also generate revenue," adding, "In particular, participation is increasing among retail companies looking to grow their own online shopping malls."
However, as money-making via e-commerce platform link connections overheats, there are concerns that the platform's image could be damaged by cases of "kidnap ads" or "clickbait ads" that appear during web surfing regardless of users' intent. In addition, there are raised possibilities that consumers could suffer damages such as personal information breaches due to malware intrusions.