Korea Internet E-Commerce Toolbox FAQ
Summary
Korea ranks among the top countries in the world in terms of Internet usage and broadband penetration. Korea’s market for high-speed Internet access services, valued at approximately $1 billion in 2000, continued to grow at an explosive rate to reach $ 3.5 billion and $ 3.8 billion in 2003 and 2004, respectively and is forecast to exceed $ 4 billion by year end 2005. The market demand for fixed-line broadband Internet services is expected to grow by 5 percent over the next five years. The market size of the wireless Internet market is expected to reach USD 6 billion by 2007.
Nearly 80% of the Korean population are internet users, and the revenue generated by the e-commerce market is expected to grow at an average annual rate of 30 percent over the next five years reaching USD 250 billion in 2005. In the first quarter of 2005, the total amount of E-Commerce transactions was valued at approximately USD 83.6 billion, a 17.8% increase from the first quarter of 2004. The Korean government projects an e-commerce penetration rate across most business sectors of at least 30 percent by 2006. In the first quarter of 2005, the B2B and B2C account for USD 81.7 billion and USD 1.9 billion respectively, an increase by 19.9% and 17.3% from 2004. There are approximately 3,440 B2C cyber shopping malls in Korea with an estimated sales of USD 7.8 billion in 2005.
In anticipation of increases in E-Commerce transactions and broadband demand, Korea’s high-speed infrastructure continues to grow, with full coverage of the country predicted by 2007 on Fiber To The Home (FTTH) network. Among the broadband services, xDSL, including ADSL (Asynchronous digital subscriber line) and very high speed digital subscriber line (VDSL), account for approximately 57 percent, and cable modem services for 35 percent. By the end of 2007, the average Internet access speed in Korea will be 100 Megabit per second (Mbps), requiring more advanced technologies and services for next generation networks. Furthermore, demand for new services, including Wireless Broadband (WiBro), Digital Multimedia Broadcasting (DMB), Radio Frequency Identification (RFID) and home networking services, are anticipated to experience explosive growth over the next few years. The phenomenal demand in services will continue to stimulate strong demand for related equipment, handsets, components and software/solutions. The Korean e-commerce market is expected to continue its strong growth through innovative technologies and new services over the next several years.
Market Overview
Korea’s market for e-commerce transactions is generally categorized as Business to Business (B2B), Business to Consumer (B2C), and Consumer to Consumer (C2C). The B2B market, including Business to Government (B2G), represents more than 90 percent of Korea’s total e-commerce transactions as of 2004. The Korean e-commerce market for B2B transactions is forecast to grow at an average annual rate of 50 percent until 2007, in line with anticipated e-business investments.
Korea’s explosive market demand for e-commerce transactions is possible, in large part, as a result of the country’s widespread broadband access. According to a recent survey by the Korean National Computerization Agency (NCA), over 90 percent of the users are connected to high-speed networks at a data transmission speed of one Mbps or faster.
Additional factors bolstering the rapid growth in e-commerce transactions are Koreans’ consumer and corporate use of e-mails and websites. It is reported that average Internet users have two e-mail addresses as of 2005 and 41 percent are using messenger services. Led by Cyworld and Daum, personalized media, also known as mini-homepages or blogs, have become a cultural phenomena. Customized individual online shopping malls, Customer to Customer (C2C), have also become so popular that major online shopping malls, including, Gmarket, D&Shop, and Interpark are already offering C2C services and competing in the market.
Korea was at the global forefront of rapidly adapting to paid services, which has resulted in many new successful e-commerce business models. Among the many factors that created and influenced the growth of Korea’s market for Internet services, paid access or download services for web contents through both wired and wireless services played a major role. Many Korean firms have changed their strategies towards the use of the Internet to profitably sell specialized fee-based subscription services, such as education, games, shopping, and avatar, thereby generating cash flow and creating quality services. For Korea’s top portal service providers e-commerce revenues comprise approximately 60 – 70 percent of the total revenues.
Statistical Data
1. Number of High-Speed Internet Service Subscribers
| Providers |
Sum |
xDSL |
Cable |
Apartment LAN |
Satellite |
Share |
| Source: MIC, November 2005 |
| KT |
6,245 |
5,537 |
- |
705 |
3 |
51.4% |
| Hanaro Telecom |
2,754 |
937 |
1,395 |
422 |
- |
22.7% |
| Thrunet |
889 |
2 |
888 |
- |
- |
7.3% |
| Onse Telecom |
361 |
- |
325 |
36 |
- |
3.0% |
| Dreamline |
109 |
42 |
56 |
11 |
- |
0.9% |
| Dacom |
220 |
- |
92 |
128 |
- |
1.8% |
| Powercomm |
183 |
- |
124 |
59 |
|
1.5% |
| VAN service
Provider |
1,131 |
9 |
1,105 |
18 |
- |
9.3% |
| Reseller |
256 |
39 |
44 |
173 |
- |
2.1% |
| Sum |
12,148 |
6,567 |
4,124,544 |
1,551 |
- |
100.0% |
2. Number of E-Commerce Transactions
| Category |
2003
Q3 |
% |
2004
Q2 |
2004
Q3 |
% |
Unit: Million
Source: National Statistical Office, Statistics on e-Commerce Transaction Volume for the Third Quarter of 2004 |
| B2B |
50 |
89.6% |
67.7 |
72.4 |
91.0% |
| B2G |
4.2 |
7.5% |
8.3 |
5.4 |
6.8% |
| B2C |
1.5 |
2.7% |
1.5 |
1.6 |
1.9% |
| Others |
0.09 |
0.2% |
0.2 |
0.2 |
0.3% |
| Total |
55.8 |
100% |
77.7 |
79.5 |
100% |
3. Web sites Rankings by Category in 2004 and 2005 (11/30)
| Rank |
Search Portal
2005 figures not available
(2004) |
Books
2005 figures not available
(2004) |
|
Shopping Mall
(2005) |
Auction
(2005) |
Game
(2005) |
| Source: KoreaClick, Dec.2004 and Ranky.com |
| 1 |
Naver.com |
yes24.com |
|
interpark.com |
auction.co.kr |
nexon.com |
| 2 |
Daum.net |
aladdin.co.kr |
|
dnshop |
Gmarket.co.kr |
Pmang.com |
| 3 |
Nate.com |
kyobobook.com |
|
gseshop.co.kr |
Onket.com |
Hangame.com |
| 4 |
Kr.yahoo.com |
Libro.co.kr |
|
cjmall.com |
gsestore.co.kr |
Netmarble.com |
| 5 |
Empass.com |
morning365.com |
|
Lotte.com |
waawaa.com |
Mgame.com |
Best Prospects
U.S. suppliers of a wide range of ICT products, software and solutions enjoy significant competitive advantages in terms of technology and price and should continue to benefit from major opportunities in Korea's rapidly growing e-commerce market. Joint ventures and licensing arrangements are key strategies to consider for market entry and growth.
Korean Internet Service Providers (ISPs), which own and operate their own Internet backbone networks, include KT, Hanaro Telecom, SK Telecom, Dacom, Onse Telecom, GNG Networks, and Powercom. Of Korea’s high-speed Internet providers, KT has a 51.4 percent market share with 6.2 million users, followed by Hanaro Telecom at 2.8 million users with 22.7 percent, and Thrunet at 0.9 million users with 7.3 percent in 2005. In the Wireless Broadband (WiBro) Internet market, the number of subscribers at 5 years after its launch is expected to be 9 million, which will generate new e-business opportunities.
The Korean government is planning to invest U.S. $ 20 billion over the next 5 years to foster the nation as a global information technology leader. Under the digitalization promotion plan, the government will speed up digitalization of the general public as well as industries and the public sector, continue upgrading information infrastructure and enhance cross-border cooperation to build a global information society. By 2006, the government projects an Internet penetration rate of 90 percent of the entire population and a classroom computer penetration rate of five students per PC with IT courses comprising 20 percent of the school curricula, and an online classroom program for adults. The government is encouraging the private sector to create a high-tech logistics and payment infrastructure for B2B networks across 20 business sectors. The government also plans to provide all government services online by 2006. To accomplish this goal, the government has plans to upgrade information infrastructure in order to link its five large government databases, including real estate, taxes, citizen services and others, through a general administration information system at the city, county, and district levels. Through this project, the government will create digital public services at all levels of government. The government is also introducing the concept of “mobile government” to allow citizens to process their civil affairs in a wireless environment. For example, without having to physically go to the Division of Motor Vehicles, one will be able to access their traffic record history from their cell phone.
The transaction volume of Korean E-Commerce is forecast to grow rapidly over the next several years. Increased E-Commerce transactions will lead to growing demand for E-Commerce solutions, a variety of equipment, networking, software and services, to develop and support e-commerce-related web-sites and transactions.
Market Access
One of the best strategies to enter the Korean market for U.S. suppliers of Internet-related products and services is to promote products through advertising in professional trade journals. Trade shows and technical seminars are also good vehicles for this purpose. However, it is essential that proper groundwork be carried out prior to such activities.
However, U.S.-based E-Commerce companies need to monitor the Personal Information Protection Act and Ministerial data privacy/SPAM regulations that are being drafted for enactment in 2006. Although the new regulations are likely to reflect concerns voiced by the public and the industry to the government, it may still be restrictive for E-Commerce firms managing user data globally to some extent.
Industry often finds the interpretation and application of new regulations confusing. For example, Korean SPAM policy enacted by the Ministry of Information and Communication (MIC) in Dec 2004, stipulates that mobile short message service and fax must comply with an “Opt-in” policy, while e-mails are under an “Opt-out” policy. Furthermore, special industries must comply with the regulations of ministries/government authorities that have special jurisdiction over those industry. For example, the financial services industry must comply with Financial Supervisory Service (FSS) policies for personal information protection and is not governed by MIC regulations.
Frequently Asked Questions
This FAQ section is prepared to allow U.S. companies to better understand the e-commerce environment in practice in Korea.
What are the most popular search engines in your country? How does a U.S. manufacturer submit sites to those search engines?
Naver (www.naver.com), which belongs to NHN (Next Human Network), is the most popular portal that offers a search engine in Korea. U.S. manufacturers can contact each search engine portal to submit sites.
Daum (www.daum.net), Yahoo Korea (kr.yahoo.com), Empas(www.empas.com), and Google(www.google.com.kr) are also categorized as part of the top five search engine portals in Korea.
Is it necessary to have the site in the local language for the website to be indexed?
No. You can use English or other languages on Korean search engines to find websites.
Is it necessary for the site to have the domain of the country? If so, is it possible for a U.S.-based site to obtain the local domain?
Is it necessary for the site to have the domain of the country? If so, is it possible for a U.S.-based site to obtain the local domain?
It is not required for a site to have a '.kr' domain. For example, Amazon.com maintains its www.amazon.com address in Korea and local consumers can purchase books online. However, Amazon’s domain is not implemented in Korean, so it could be inconvenient for Koreans who are not familiar with the English language. Google, however, maintains an (www.google.co.kr ) address in Korea. It does have a Korean language version in its '.kr' domain.
The National Internet Development Agency of Korea (NIDA) gives a thorough explanation of the process and qualifications of how to register domains. (www.nic.or.kr).
Registrants must abide by the following terms and conditions;
- Registrants must have a local presence within Korea
- Registrants must meet certain criteria that are classified by the characteristics of the secondary domains such as co/ne/or/re.
Individuals/organizations who have a local presence within Korea are eligible for registering a ‘.kr’ domain name.
Are there any popular online marketplaces or auctions, like Amazon.com or ebay.com in the U.S.?
GS Homeshopping (www.gseshop.co.kr), Interpark (www.interpark.com), CJ mall(www.cjmall.com), and Samsung mall(www.samsungmall.co.kr) are well-known online marketplaces primarily dealing with online products. Also, Auction e-Bay company (www.auction.co.kr, which was acquired by eBay) is famous for online auctioning.
There are online marketplaces dealing with specific items such as computer components, books, etc. The most popular computer shopping mall site is Danawa Corp. (www.danawa.co.kr). This site compares all the computer components and recognizes the most inexpensive ones.
For purchasing books on the Internet, Kyobo Bookstore (www.kyobobook.co.kr) and Youngpoong Bookstore (www.ypbooks.co.kr) are popular. Both bookstores are based off-line, whereas Aladdin (www.aladdin.co.kr) or Yes24 (www.yes24.com) are online bookstore companies, which are also popular and sell CDs, DVDs, etc. Through online purchases, customers receive discounts of up to 40%.
Can the exporter advertise its Internet site/product/service in pop up ads on the local ISP's networks? Are there any regulations on spam or privacy? Are there other e-commerce specific laws?
Generally, the exporter can advertise, but it depends on the content of the advertisement and their contracts with ISPs. There are specific regulations on spam and privacy, which are included in the Act on Promotion of Information & Communication Network Utilization and Information Protection (MIC Act 7262, Dec 30, 2004), now in force. The Korean Ministry of Commerce, Industry and Energy (MOCIE) regulates the Basic Electronic Commerce Act (MOCIE Act 6614, Jul 1, 2002) and relevant implementing regulations, Source: Ministry of Information and Communication Republic of Korea (www.mic.go.kr). Korean email SPAM policy is consistent with the U.S. system of “opting out” – e.g. unsubscribing.
Are there restrictions on advertising (for example, are comparative ads allowed? Are there restrictions on ads targeting children? Is it permissible to use lotteries, competitions, contests, games or bets as part of a promotional offer?).
There is no specific law pertaining to Internet advertising but it should abide by and not conflict with the existing laws and regulations set forth by the Ministry of Information and Communication or Youth Protection Act enacted by the Ministry of Government Administration and Home Affairs (MOGAHA Act 6479, May 24, 2001).
According to the Youth Protection Act, youth-harmful media that is applicable to Article 7-5 and 7-7, utilizing broadcasting means, should not be aired during the time that the president decree agrees. (MOGAHA Act 6479, Article 19, Limitation of Broadcasting Time) The Ministry of Culture and Tourism (MoCT) also refer to Youth Protection Act in the Act on Music, video, and games that youth-harmful advertisement/ promotion of music, video and game contents must not be distributed or posted. (MoCT Act 7426, Article 38, Limitation of Advertisement, Promotion)
The Korean Fair Trade Commission (FTC) has become less stringent with comparative advertisements since 2001. There is also another law designed to protect personal data that restricts youth-harmful media; Act on Promotion of Information & Communication Network Utilization and Information Protection (MIC Law 7262, Dec 30, 2004) Article 42-2
Lotteries, competitions, contests, games or bets can be utilized as part of promotional offers in Korea.
Source: Ministry of Information and Communication Republic of Korea (www.mic.go.kr)
National Youth Commission (www.youth.go.kr)
To what extent can a buyer in this market pay for an order over the Internet by use of a credit card or other Internet-based financing vehicle, such as PayPal?
There are many ways to complete transactions on the Internet. By using a credit card, real-time cash transfer, Internet Security Payment (ISP), or mobile phone (or SMS), it is possible to buy or sell through the Korean Internet. One can also use financing vehicles, including Payplus, Globalpay, Billgate, etc. As the size of online transactions is still growing rapidly, the e-commerce industry continues to upgrade its security solutions and systems to minimize the security risk. However, at all times, one should be aware and cautious when dealing with Internet based transactions.
Are Internet transactions recognized as legal sales contracts? Is there a digital signatures law that recognizes digital signatures?
Yes, the Electronic Signature Act has been effective since 1999 in Korea. The E-Signature Certification Management Center was established within the Korea Information Security Protection Agency to implement the full force of the Act. Source: Korea Electronic Certification Authority (www.crosscert.com)
Would there be any Customs or related delays incurred on Internet-transacted sales?
In general, customs duty and Value Added Tax (VAT) can be applied to online-imports valued higher than U.S. $150. Online transactions of downloading immaterial assets, including software, movies, and music are exempted from customs duty. Customs duty details are available online based on HS codes from the Korean Customs Service (www.customs.go.kr) and VAT is a single flat rate of 10%.
Is there a national web seal or trust mark program in this market that increases consumer confidence? E.g., BBBOnline in the U.S.
The Korea Institute for Electronic Commerce (KIEC, www.kiec.or.kr/ www.etrust.or.kr) operates an e-trust mark committee and authenticates Korean websites which are listed on the KIEC website. KIEC participates in the Global Trustmark Alliance that includes BBBOnline in the U.S. There are I-safe marks and ePrivacy marks authenticated by the Korean Association of Information and Telecommunication (KAIT, www.privacymark.or.kr). The ePrivacy and i-safe marks are awarded after a comprehensive review of the individual website’s administrative systems, which should have an effective privacy and security system to ensure the protection of Internet users.
Can U.S. manufacturers participate in local government procurements via Internet based tenders? If so, how are these tenders publicly advertised?
Korea joined the WTO Government Procurement Agreement (GPA) on April 15, 1994; the GPA went into effect on January 1, 1997 in Korea. Korea enacted the Act Relating to Contracts to which the State is a Party (ARCSP), in accordance with the GPA, in 1995. The ARCSP applies to contracts to which a State is a party, such as the case of government contracts through international tendering subject to the GPA or contracts between a State and a citizen of the Republic of Korea. The term “State” covers the central government agencies of Korea. The ARCSP is the fundamental law outlining the basic principles and procedures of government procurement which also prescribes that government procurement exceeding certain threshold values should be conducted by international tendering as provided in the GPA.
The Public Procurement Service (PPS, www.pps.go.kr/neweng) launched a Government e-Procurement System (GePS, www.g2b.go.kr, www.pps.go.kr/neweng/html/bid/i_bid_030.html) in Oct 2002, which digitalizes the entire bidding process from order to payment for public organizations. The bidding information, which is legally required to be publicized in GePS, includes estimated costs, technical specifications, and evaluation criteria. However, U.S. manufacturers must have a business license or a local partner to register with PPS as a supplier.
Upcoming Trade Shows/Events
One of the most effective sales promotion strategies is to present technology, applications, and cost/performance involved. In this respect, trade shows are ideal opportunities for U.S. suppliers to demonstrate the superiority of their products/services to Korean consumers and thereby enter domestic distribution channels. The following trade shows are effective vehicles for the promotion of E-Commerce related products and services:
EXPO COMM WIRELESS KOREA
| Dates of Exhibition: |
April 2006 |
| Organizer: |
Korea Import and Trade Association |
| Contact: |
Sun-Jeong Kim
E-mail: itkorea@kita.net
Phone:82-2-6000-5058, Fax:82-2-6000-5823 |
| Dates of Exhibition: |
May 10 - May 13, 2006 |
| Organizer: |
Ministry of Information and Communication |
| Contact: |
Jong-Hoon Han
Email: hjh@coex.co.kr
Phone:82-2-6000-1078, Fax:82-2-6000-1310
http://www.expocomm.co.kr |
The 20th Solution & Contents Exhibition of Korea
| Dates of Exhibition: |
Jun 21 - Jun 24, 2006 |
| Organizer: |
The Electronic Times |
| Contact: |
Phone:82-2-2168-9333, Fax:82-2-2336-8225
www.sek.co.kr |
SoftExpo 2005
| Dates of Exhibition: |
Dec, 2006 |
| Organizer: |
Ministry of Information and Communication |
| Contact: |
ex1@software.or.kr
Phone:82-2-2141-5790, Fax:82-2-2141-5799
www.softexpo.or.kr |
Contact Information
Local Contact
(Mr.) Chris Ahn
Commercial Specialist
Commercial Service Korea
U.S. Embassy
32 Sejong-ro Jongro-gu
Seoul 110-710 Korea
Tel: 82-2-397-4186
Fax: 82-2-737-5357
Email: chris.ahn@mail.doc.gov
Website: www.buyusa.gov/korea
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