The drastic price policy, which includes free shipping and free returns due to low global inflation and low growth, has gone beyond negative perception of “made in China,” which used to be synonymous with “low quality,” and is wiping out thin wallets of foreign consumers including the U.S. In particular, Chinese e-commerce companies, which are rapidly growing in the U.S., are poised to conquer the global market. Korea is no exception. China ranks No. 1 in the Korean overseas direct purchase market. According to Korea’s overseas direct purchase amount in the third quarter last year, the cumulative overseas direct purchase amount in China amounted to 1.66 billion U.S. dollars, 1.05 billion dollars in the U.S., and 450 million dollars in Europe. China’s Alibaba Group’s AliExpress and PDD Holdings’ overseas shopping app Temu, which runs Pinduoduo, a large Chinese e-commerce company, are aggressively expanding their businesses in Korea.
According to WiseApp, an app and retail analysis service, AliExpress and Temu were ranked first and second in the app rankings with the largest number of users between January and November last year. AliExpress’ monthly users reached 7.07 million in November, while Temu had 3.54 million. These apps are believed to have quickly settled in the Korean market with its ultra-cheap strategy and free delivery. Pinduoduo is also famous for its low-cost strategy in China. Although delivery is not as fast as other local e-commerce companies such as Jingdong.Com, it is competitive in price. Temu also has a wide range of low-cost products and is attractive to consumers suffering from high prices even if it takes a while for delivery to arrive since it departs from China. In the case of AliExpress, it is reportedly considering building a logistics center in Korea for fast delivery services such as ‘One Day Delivery’. The company will participate as an official partner for the 2024 Gangwon Winter Youth Olympics. It seems that the company is trying to dispel negative images such as the controversy over the sale of fake products, which is biased toward low prices. If Chinese shopping apps soar in popularity, the Korean online shopping industry will inevitably shrink. This will deal a blow to small business owners who move into online shopping malls.The Korea Internet Business Association, the Korea Startup Forum, the Korea Venture Business Association, the Korea Online Shopping Association, and the Korea Digital Advertising Association expressed concern in December last year, saying, “With the recent increase in the number of domestic users of China’s AliExpress in the online shopping sector, the pre-regulation of online platforms is like giving a poison to the already struggling domestic online platforms.” Malaysia seems to be in a similar situation. Malaysia has decided to impose a 10 percent sales tax on low-end imported products sold online starting this year to protect its small businesses and merchants. All products imported into Malaysia from overseas except cigarettes are subject to sales tax, and major online shopping sites such as AliExpress and Shopee, the largest e-commerce company in Southeast Asia, have started imposing sales tax. Chinese companies’ low-cost strategies do not distinguish between online and offline. The case is the case of Shein, a fashion company called the “Chinese version of Uniqlo.” The company is not well known to the Chinese. It is because it does not sell products in China, but caused a fever overseas including the U.S. In 2022, Shein recorded sales of 22.7 billion dollars, surpassing Sweden’s H&M (about 21 billion dollars).The secret of Xuin’s growth into one of the world’s largest fashion brands used by hundreds of millions of people around the world is its low-cost policy. Some say that Xuin is a disruptor to the fashion industry’s ecosystem, selling skirts for 5 dollars and jeans for 9 dollars in recent years. After gaining dominance in the online clothing retail industry, Xuin has expanded its business into an e-commerce platform to compete with Amazon of the U.S. and Temu of China. It recently acquired a stake in U.S. medical retailer Forever 21, pioneered an offline sales route, and also bought British women’s fashion brand Miss Guided. On the rise, Xuin applied for an initial public offering (IPO) in the U.S. stock market last year. Xuin’s corporate value was recognized at 66 billion dollars, which critics say can be even higher in its initial public offering. Xuin plans to raise up to 90 billion dollars through an IPO, which would eventually lead to the highest corporate value among Chinese companies listed in the U.S. An increasing number of cases are moving its headquarters abroad to remove its label as a “Chinese company” that hinders its growth. Xuin moved its headquarters to Singapore, canceled the registration of China’s Nanjing, and established branches in Ireland and Indiana.Xuin also stressed in a statement, “We are a multinational company operating with consumers in 150 markets around the world.” The move is interpreted as an intention to erase the feeling of China ahead of the mega IPO. Temu also established its headquarters in Boston, the U.S., and its parent company, Pinduoduo, also moved its headquarters from China to Ireland. However, it will not be easy to erase its image as a Chinese company as long as it ships Chinese goods from China just by moving its headquarters. U.S. Senator Marco Rubio (R-Florida), who is leading the response to forced labor in Xinjiang Uyghur, criticized in a statement, “No matter how hard Xuin tries to hide it, no matter how hard he tries to hide it, no one will be deceived.” Although the growth of Chinese e-commerce companies is steep, it is pointed out that there are many checks externally and that low-cost policies have limitations in expanding profits internally. The U.S., which is engaged in a trade war with China, is most active in checking direct purchases made in China. The U.S. Customs Act currently does not impose tariffs on products under $800. It targets all foreign products as well as Chinese products such as Temu and Xuin, raising the need to revise the law as Chinese products emerged as the biggest beneficiaries.
SOPHIA KIM
ASIA JOURNAL
