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Amazon fuels e-commerce rivalry with free shipping campaign

By Kim Hae-yeon

Published : April 18, 2024 - 14:49

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An Amazon logo shown in front of a building (123rf) An Amazon logo shown in front of a building (123rf)

US e-commerce giant Amazon introduced free shipping benefits for Korean consumers as the firm strategically eyes the country's overseas direct purchase market amid the increasing competition in the e-commerce industry here.

Starting Wednesday, Amazon has implemented a policy offering complimentary shipping for orders exceeding $49 worth of eligible items for delivery to South Korea, with the shipping address set within South Korea on its website.

Eligible items include not only small essentials but also bulky home appliances. While delivery times fluctuate depending on the product, Amazon ensures that estimated delivery times are indicated during checkout, subject to product availability and the final shipping destination.

Amazon has sporadically been running such free delivery promotions in different countries as part of its global promotional strategy, according to industry sources.

In the Korean market, the promotion is perceived as Amazon's extension efforts following successful market exploration via collaboration with 11th Street, one of the top Korean open market platforms affiliated with the carrier SK Telecom.

Previously, Amazon entered Korea through a partnership with SK Telecom and 11th Street, leveraging the telecom carrier's paid membership base. Since August 2021, 11th Street has facilitated overseas direct purchases for SK Telecom members by offering complimentary shipping and exclusive customer support for Amazon products.

However, customers have observed some limitations, such as the absence of certain bulky or high-priced Amazon products such as TVs, golf clubs and luxury fashion brand items, which were unavailable on 11th Street.

Industry analysts also view Amazon's free delivery promotion as a strategic response to the expanding prominence of Chinese e-commerce platforms.

In recent years, platforms like Temu and fast-fashion retailer Shein from China have penetrated the US market by undercutting prices, posing a potential threat to Amazon's dominance. Therefore, Amazon's Korean free delivery strategy would likely serve as a trial period for Amazon to reevaluate its strategies and market developments.

"Korean consumers generally perceive Amazon as a trustworthy brand, while Chinese e-commerce platforms, despite their drastically growing popularity, still struggle with countless complaints regarding product quality and counterfeit items in Korea. Such contrasting perceptions may influence the competitive landscape here," an industry official from a domestic e-commerce platform said.

Screenshot of Amazon's official website that directs free shipping offer for deliveries to Korea (Amazon website) Screenshot of Amazon's official website that directs free shipping offer for deliveries to Korea (Amazon website)

The official added that while entering the Korean market at this juncture may present significant benefits in assessing present capabilities and future prospects, it is still too early to gauge Amazon's competitiveness and success in Korea.

"At the end of the day, no matter which country consumers are from, they inherently seek price-competitiveness. So although the free shipping strategy may serve as an initial incentive, the overall price-competitiveness of the product is a key point in fostering consistent purchases through a specific channel."

Likewise, recent trends highlight a significant reshaping of the Korean online market, with Chinese e-commerce behemoths like AliExpress strengthening their presence to an unprecedented degree.

According to market tracker WiseApp, AliExpress saw a 114 percent surge in monthly active users compared to the previous year, totaling 8.87 million, while Temu closely trailed with 8.29 million. The statistics position them ahead of most major Korean e-commerce competitors, except for Coupang, which boasts 30.86 million users.