If you’ve been following our series on taking your U.S. brand global, you’ve learned there’s a shortlist of countries that provide the best opportunities. In Europe, starting in the United Kingdom is your best bet. In the Americas, you’re going to want to hit up your Canadian neighbors. But if you want to expand into Asia, selling in South Korea is a great place to start.
Show Me the Money
South Korea is home to 51.5 million people with a total GDP of 1.5 trillion USD. It was ranked as the 14th richest country in 2018. Its GDP per capita is expected to reach 31,393 USD by 2021.
This wealth helps make South Korea one of the biggest e-commerce markets worldwide. But that’s not the only reason online selling in South Korea is a winning proposition. Here’s more:
- South Korea has the highest average internet connection speed globally. Its people keep up with the latest technological advancements and have a high mobile adoption rate.
- Over 98% of South Korean households access the internet regularly.
- There are currently 30.5 million e-commerce shoppers in South Korea, with an additional 1.33 million expected by 2021.
- The retail ecommerce volume in South Korea will grow to 32.56 billion U.S. dollars by 2021, up from 19.12 billion U.S. dollars in 2016.
The takeaway? Easy access to online technology equals more opportunity for online sales! And South Koreans interest in online shopping only seems to be increasing.
With 90.1 billion USD in sales, China benefits the most from e-commerce selling in South Korea. But that doesn’t mean there isn’t room for other countries to get in on the action. Key players include:
- Japan (44.6 billion USD)
- The U.S. (42.7 billion USD)
- Germany (20.2 billion USD)
- Saudi Arabia (17.7 billion USD)
With the growth South Korea’s e-commerce market is seeing, there are plenty of opportunities for U.S. sellers who want a piece of the pie.
Hunting for a Bargain… and Some Information
Unlike Canadian buyers, consumers in South Korea aren’t hung up on buying products made domestically. In fact, they’re inclined to purchase non-domestic products if it can save them money. They’re perfectly happy purchasing from a foreign company’s website and sacrificing fast delivery times in order to get lower prices.
In addition, tech-savvy Korean consumers like to be well-informed when purchasing a product. They hunt down all the information they can, thoroughly researching products online—especially through social media—before making a purchase.
The Products South Koreans Are Looking For
Young Koreans like to purchase apparel and fashion accessories that allow them to express their individuality. On the other hand, the middle-to-upper-class, aspiring to lifestyles portrayed by the media, have a keen interest in high-quality luxury goods.
That said, topping South Korea’s list of e-commerce categories is Travel and Transportation Services, with Clothing and Home Electronics close behind. The chart below, from Statista, shows the top ten product categories in South Korea in 2017 (currencey: South Korean won, in billions).
The most popular foreign sourced products from online retailers by Koreans in 2017 were:
- Dietary supplements (16%)
- Cosmetics (14%)
- Food (13%)
- Apparel (12%)
- Footwear (8%)
- Electronics (7%)
Duties and taxes when shipping to South Korea
Importing and shipping to Korea is easier and quicker than many other countries—a major reason e-commerce in South Korea is flourishing.
Duties are calculated on the CIF (Cost-Insurance-Freight) value of the imports. As of January 1, 2018, 92.3% of U.S. products enter Korea duty-free. Under the Korean-US Free Trade Agreement (KORUS FTA), express courier service mailed goods under $200 are duty free when sourced from the U.S., and items “made in the U.S.A.” under $1,000 are exempt from KORUS FTA documentation.
When selling in South Korea, be aware different items require different taxes and documentation. There’s a 10% Value Added Tax (VAT) on all imports. A special excise tax of 10-20% is levied on certain luxury items and durable consumer goods.
Check out export.gov for more detailed information on duties and taxes when shipping to South Korea.
If you’re looking to expand your e-commerce business into the Asian market, South Korea is the perfect starting point. With their love of technology and their ever-growing desire for foreign goods, South Koreans are likely to make great customers for U.S.-based online brands.
Need help getting started? We suggest you choose an order fulfillment partner with fulfillment centers in Asia (or even in South Korea itself) to keep shipping costs low and delivery times fast. With its South Korean warehouse, Simple Global could be the perfect choice. Contact us today to see how we can help.
DISCLAIMER: This is for informational purposes only and is not to be interpreted as legal advice. Please consult independent legal advice for information specific to your circumstances.