South Korea: an e-commerce & payments primer
South Korea is affluent, has an excellent infrastructure, the people are used to shopping online and the economy is performing well. Its economy has proved remarkably resilient during the most challenging of times.
South Korean consumers like to pay for e-commerce purchases using cards. But alternative and local payment methods also command a significant market share. South Koreans pay for 72% of online purchases with credit cards . But 28% of all cards in circulation were issued by (from a Western perspective) non-standard providers .
Visa has a 40% share of the card market, Mastercard 28% and American Express just 4% . The remainder of the South Korean payment market is split between E-wallets and bank transfers, on 17% and 5% respectively, a range of minor payment providers (4%), and cash (2%) .
South Korea’s e-commerce market
E-commerce accounts for 8% of all retail sales in South Korea . 65% of all online purchases are completed on a mobile device . Koreans primarily buy online because of the convenience of delivery. Some stores such as Coupang offer a dawn delivery service – if you order before midnight, they will deliver at dawn the next day. And most stores offer at least a next day delivery if not same day .
Until recently there was no Amazon in South Korea. Then, in the summer of 2021, the global e-commerce giant teamed up with Korean e-commerce site 11 Street to offer Korean consumers access to millions of items from Amazon’s stock list . So far, however, the local market leader Coupang retains its leading position, with an almost 25% market share of Korean e-commerce .
Clothing (29%) is the most popular online shopping category, followed by food (16%), and electrical goods (16%) . The average online shopper spends US$2,321 a year with cross-border and Korean e-commerce merchants 
Digital infrastructure, financial inclusion and logistics in South Korea
As envious geeks and gamers the world over will tell you, South Korea has one of the fastest broadbands in the world, with urban dwellers enjoying speeds of 217Mbps . South Korea also tops
the international rankings for mobile broadband, with speeds up to 190Mbps . 97% of South Koreans have an Internet connection and 85% have a smartphone . Connectivity will not be a limiting factor for merchants wishing to expand into the country.
Nor will financial inclusion be a problem. 95% of South Koreans are banked and 64% have a credit card . South Korea is a world leader in digital transactions. Even before the pandemic, only around 20% of all retail purchases were made using cash .
The central bank has previously vowed to make the country cashless in the near future . In 2020, despite having its hands full with the pandemic, the Bank of Korea pushed ahead with its programme to develop a central bank digital currency (CBDC) .
Merchants planning to operate in South Korea need to be plugged into the country’s digital-payments infrastructure. Recent years have seen a significant investment in parcel and logistics capacity, a sector which is growing at a rate of 10% a year and is forecast to continue doing so until at least 2027 . South Korea is 25th, out of 160, in the World Bank Global Logistical Performance Index .
The South Korean economic and market outlook
Broadening out to a wider view of the country as an e-commerce market, economic growth looks assured, at least for the foreseeable future. The IMF predicts that GDP will expand at a rate of 2.5% in 2022, rising to 2.9% in 2023 . The average South Korean earns US$32,390 a year, just US$1,807 less than the average EU citizen .
Despite the economic headwinds, unemployment was still at record-low levels as we were updating this entry. Retail spending was still growing throughout the first and second quarters of 2022, indicating robust demand even in the face of a complicated economic outlook .
Rates of digital and financial inclusion are high. As long as you understand local conditions and preferences in South Korea, there could hardly be a better e-commerce market in which to invest.
- Original PPRO research