When e-commerce businesses make sales to customers in countries outside of Japan it is known as cross-border e-commerce. In Japan, cross-border e-commerce is gaining traction as a popular way for businesses to expand into new markets.

South Korea is a market with great potential for cross-border e-commerce businesses in Japan. The two countries are located very close to one another and Japan's culture, including its food, music, television, anime and manga, has grown popular in South Korea.

In this article, we'll go over the basics of cross-border e-commerce in South Korea, including what businesses in Japan need to know. We'll also discuss the main payment methods used in South Korea, as well as interesting trends in the country's e-commerce market.

What's in this article?

• E-commerce in South Korea
  
• How can cross-border e-commerce businesses expand into South Korea?
  
• Which payment methods should you use for cross-border e-commerce in South Korea?
  
• What to know about cross-border e-commerce in South Korea
  
• E-commerce trends in South Korea
  
• Key characteristics of South Korea's e-commerce market
  

E-commerce in South Korea

Let's take a look at e-commerce in South Korea, drawing on data from the Japan External Trade Organisation (JETRO), the Ministry of Internal Affairs and Communications and the Ministry of Economy, Trade and Industry.

How does e-commerce in South Korea differ from Japan?

South Korea has about half the population of Japan. However, its e-commerce market share is significantly higher, ranking fourth globally, just behind China, the United Kingdom and Indonesia. The growth of South Korea's e-commerce market is closely tied to its increasing adoption of cashless payments.

As we'll explore in more detail later, the country's search engine market is dominated by Naver, an internet service provider so ingrained in daily life that it's been widely deemed South Korea's national search engine. In addition, KakaoTalk serves as a core communication platform, much like LINE does for users in Japan. The country's internet infrastructure is largely built around domestic businesses, resulting in a uniquely localised digital environment.

The features of e-commerce in South Korea

Let's go over some of the most notable features and characteristics of e-commerce in South Korea.

Live commerce is a popular sales tool

Live commerce is gaining popularity in South Korea's e-commerce market. Live commerce refers to a sales method in which streaming videos are used to advertise products to customers in real time. Customers in South Korea tend to rely on reviews and word of mouth when purchasing new products. In live commerce, influencers showcase the quality and feel of a product on a live video stream, allowing customers to get a feel for the product. This is otherwise impossible to do via the more static content on traditional e-commerce sites. These videos are a valuable tool for customers in deciding whether or not to make a purchase.

Live commerce is often used to promote products that customers can't actually try on. For example, customers can't tell how cosmetics will look on their skin, how effective they will be or how they will smell. Live commerce is also popular for products such as clothing and accessories, because customers can't tell how they'll feel, fit or look on their bodies. Live commerce videos feature not only influencers such as celebrities, but sometimes the people who run the e-commerce site as well.

Rewards point systems and coupon distribution are very popular

Competition among e-commerce businesses in South Korea is fierce. Businesses use various marketing strategies to attract customers. In particular, unique sales events and rewards point systems exclusive to a particular business can generate a significant degree of excitement among customers. Limited-time coupons also tend to increase interest in a particular site.

There are large, general e-commerce shopping centres and highly specialised e-commerce sites

In South Korea, there are two main types of e-commerce sites: large e-commerce shopping centres and smaller e-commerce sites that specialise in particular products. Just like Japan's Rakuten Ichiba, South Korea's large e-commerce shopping centres carry a wide variety of products, including cosmetics, clothing, food, daily necessities, home appliances and furniture.

On the other hand, smaller, more niche e-commerce sites tend to sell products with a clearly defined purpose. These sites are highly specialised and target a specific customer base. For example, a fashion-focused e-commerce site will sell products in specific categories, such as women's apparel, second-hand clothing or fitness equipment.

These specialised e-commerce sites are often run by relatively small businesses or individuals, but a key feature of e-commerce in South Korea is the fact that even though these sites can be small or run by a single person, they can still be known to many people. E-commerce sites that specialise in a single category also have the advantage of being able to attract and retain a particular type of fan or customer.

Major e-commerce shopping centres in South Korea

Let's look at the major e-commerce shopping centres in South Korea – note that none of these supports the Japanese language, so businesses in Japan looking to use them will need to localise their content accordingly.

Coupang

Coupang is South Korea's largest e-commerce shopping centre and is often referred to as the Amazon of South Korea. Coupang has a wide range of product categories, including fashion, beauty and food. The business' Rocket Delivery express shipping service offers next-day delivery and is popular with many customers.

Coupang also offers a cross-border e-commerce service called Rocket Overseas for customers who are from South Korea but are living outside of the country. As a subset of this service, Coupang's Japan Store sells a variety of products from Japan, such as health and beauty products, to customers from South Korea. Coupang purchases products from businesses in Japan, but ships them from its own warehouses once orders are received. Note that Coupang discontinued its shipping service from South Korea to Japan in 2023, so customers living in Japan can no longer purchase products on Coupang.

GMarket

GMarket is one of the largest e-commerce shopping centres in South Korea. Unlike Coupang, customers in Japan can order products, easily obtaining products from South Korea that are not available in Japan. The site has features such as reward points that can be used for future purchases and a full review function, so customers can enjoy a shopping experience that feels quite similar to using Rakuten Ichiba.

11Street

11Street is another major e-commerce platform in South Korea, offering a wide range of products similar to Coupang. The site supports international shipping, including to Japan and allows customers to select their preferred currencies when placing orders.

TMON

TMON is another leading e-commerce platform in South Korea. Like other major online shopping centres, it offers a wide selection of products, including food and fashion, as well as a broad range of experiential services, including travel and leisure. One of TMON's standout features is its frequent limited-time events, such as free shipping on Fridays or flash sales tied to specific time slots. However, TMON does not provide international shipping – including to Japan – so its services are exclusively targeted to customers within South Korea.

How can cross-border e-commerce businesses expand into South Korea?

While there are a variety of ways to get started with cross-border e-commerce, let's look at the key strategies that businesses in Japan need to know if they want to pursue cross-border e-commerce specifically in South Korea.

Creating an in-house e-commerce site and launching in South Korea

With this strategy, a business sets up and utilises its own e-commerce site. The function and design of the site can be fully customised, making it easy to fit the business' unique brand and style. When building an e-commerce site, an e-commerce platform – such as an application service provider (ASP) – can be used as the underlying infrastructure system or the site can be custom-built from scratch.

Keep in mind that building an e-commerce site usually takes a long time and costs a significant amount of money. For this reason, business owners need to be very careful about cashflow and keep an eye on cost effectiveness and there needs to be a solid system in place that promotes collaboration between in-house development teams and any external partner businesses.

Additionally, for cross-border e-commerce targeting customers in South Korea, it's crucial to build a website that fully supports the Korean language. This means that businesses need to hire staff who are fluent in Korean and get advice from experts who are familiar with South Korea's e-commerce market.

Creating a storefront on an e-commerce site in South Korea

Opening a store using an e-commerce site that is based in South Korea is another option for cross-border e-commerce. As previously stated, South Korea's market has both specialised e-commerce sites and more general e-commerce shopping centres – businesses can sell in either or both places. The advantage of using an existing e-commerce shopping centre is that it already has a certain level of customer awareness, so it might be relatively easy to attract customers. However, businesses must be sure to check with each e-commerce shopping centre in advance for details on the fees and other costs associated with opening a storefront, as well as the terms and requirements for launching a store.

If a business doesn't want to use an EC shopping centre to sell its products, it can open a more specialised site to reach its target demographic.

Which payment methods should you use for cross-border e-commerce in South Korea?

When selling products to customers in South Korea, it's important to use the payment methods that are most widely used in the country.

With South Korea's advanced internet infrastructure and cashless transactions becoming quite common, credit card and mobile payments are the norm. The government of South Korea also supports the digitisation of payments, so many people predict that cashless payments will become even more widespread in the near future.

The main payment methods used in South Korea's e-commerce market are:

• Visa and Mastercard
  
• KakaoPay
  
• Naver Pay
  
• Samsung Pay
  
• PAYCO
  
• Toss
  

As you can see, there are a number of payment methods used in e-commerce in South Korea. For a business from Japan pursuing cross-border e-commerce in South Korea, it's important to be able to accommodate as many of these payment methods as possible.

What to know about cross-border e-commerce in South Korea

Now, let's look at the key points to consider when selling products to customers in South Korea via cross-border e-commerce.

The main search engine is Naver

In Japan, the most commonly used search engines are Google and Yahoo! JAPAN. In South Korea, on the other hand, the search engine landscape is dominated by Naver. Because Naver's search algorithm differs significantly from Google's, search engine optimisation (SEO) strategies that are effective with Google might have little to no impact on Naver. As a result, marketing strategies targeting South Korea's e-commerce market must be specifically tailored to Naver.

For instance, if your brand maintains a blog, publishing content through Naver Blog can improve your chances of ranking higher in search results, in turn boosting your site's SEO performance. Additionally, since listing ads perform well on Naver, it's important to pay close attention to elements like the page title and opening sentence of your content.

Corporate status in South Korea might be required

In many cases, having the status of a corporation in South Korea is mandatory to set up an e-commerce site or open a storefront in an e-commerce shopping centre. Because the documentation and procedures to obtain corporate status must be done in Korean, it's a good idea to look into working with an agency to simplify the process. Additionally, after acquiring corporate status, there's a possibility that you'll incur taxes based on your earnings, so consider consulting with a specialist for details regarding tax payments.

In some cases, corporate status is not required for e-commerce shopping centres, so be sure to check the terms and conditions carefully before opening a storefront.

Some items can't be sold through cross-border e-commerce

When selling products through cross-border e-commerce, you must first check whether those products can be exported into the target country. For example, importing alcoholic beverages via cross-border e-commerce is not allowed in South Korea; all alcoholic beverages, whether they are imported or locally produced, must be sold through a wholesaler. Thus, it's not possible to sell alcohol directly to customers through cross-border e-commerce.

This is also true for the large, domestically focused e-commerce shopping centres in South Korea. Even Gmarket cannot sell domestically produced soju or makgeolli.

Therefore, businesses must check in advance what items can and cannot be sold through cross-border e-commerce.

E-commerce trends in South Korea

The proliferation of e-commerce sites has had a major impact on the daily shopping activities of customers in South Korea. Let's take a look at two of the latest trends in e-commerce in the country.

Various initiatives targeting "Generation MZ"

In South Korea, many e-commerce operators use sales strategies targeting so-called "Generation MZ", a group that combines Millennials and Gen Z customers. For the digital-native Generation MZ, online shopping and the use of social networking services are an essential part of daily life. And an important factor in operating an e-commerce site in South Korea is providing an experience that meets the needs of Generation MZ.

For example, live commerce is a selling approach that is centred on Generation MZ. Using the online-merge-offline (OMO) strategy to provide customers with a pleasant shopping experience is also an important way to reach Generation MZ in the e-commerce world. The OMO strategy is also a major trend in China's cross-border e-commerce market.

Kakao Gift, an online gift service offered by South Korea's major chat app KakaoTalk, is popular among members of Generation MZ. This service allows users to easily send e-gift certificates and other items to family and friends via chat. It is widely used in South Korea as both a communication tool and an e-commerce linking service.

Expansion of Korea's fashion and K-beauty overseas

In recent years, Korea's fashion and beauty products have attracted attention beyond the country's borders. In particular, cosmetics from Korea (commonly called "K-beauty") are extremely popular around the world and various K-beauty products are sold in Japan through cross-border e-commerce.

The great advantage of Korea's cosmetics and beauty products is that they are sold at reasonable prices despite their high quality. This excellent price-performance ratio is one of the reasons why K-beauty products are so popular with customers. Many newly established K-beauty brand businesses are also looking to expand into overseas markets, which will have an impact on the overall cross-border e-commerce market.

Key characteristics of South Korea's e-commerce market

In this article, we discussed what you need to know to launch cross-border e-commerce operations in South Korea – such as the size of the market, its features and characteristics and a wide range of other points for consideration. Because it is so close to Japan geographically, South Korea has great potential as a destination for cross-border e-commerce. The country is also home to many prospective customers who are interested in brands and products from Japan. In fact, a recent rise in Japan's inbound tourism is due in part to travellers from South Korea.

To enter the cross-border e-commerce market in South Korea, you must have a firm understanding of the e-commerce landscape there. It's important to accurately grasp the needs of potential customers, particularly Generation MZ. Providing payment methods that are commonly used in South Korea is key for successful cross-border e-commerce in this market. In particular, businesses need to support a variety of cashless payment options, including credit cards.

Stripe offers a wide range of functions to support the efficient operation of payment services, including acceptance of cashless payments – such as credit cards – information processing and revenue management. Stripe Checkout supports more than 30 languages and more than 135 currencies. Checkout can also be used to optimise and simplify the payment pages of cross-border e-commerce sites. This makes it possible to provide customers with a smooth and pleasant payment experience, which can potentially lead to an increase in a business' purchase completion rate.