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Drivers & Impediments of Cross-border e-Commerce: Policy Suggestions for Consumer Protection in South Korea

Author Kim Sukkyung, Kim Chunkon, Koh Daeyoung, Goo Jinkyung Date 2016.12.28 Page
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The age of e-commerce dawned in South Korea on June 1, 1996, when Interpark, Korea’s first-ever online shopping mall, finally opened. Two decades have passed since then, and e-commerce has become an integral part of daily life for Koreans. Statistics confirm its astonishing growth in the country: according to Statistics Korea, online purchases have been consistently increasing their share of total retail sales, reaching 13.7 percent in 2016, nearly equivalent to the share held by large department stores. Since 2010, retail sales at large department stores have been growing at an average of 5.7 percent a year, while average annual growth in retail sales by e-commerce malls has been 10.3 percent. E-Commerce is fast becoming the predominant channel for retail transactions in Korea.  

 

The technological innovation that has made this remarkable growth possible is changing shopping patterns in Korea, and even weakening the national borders in retail transactions. An increasing number of Korean consumers today make direct purchases from businesses abroad via online channels. 

 

This new form of retail transactions, involving consumers directly purchasing products via online shops abroad, is in fact rising all around the world. According to Accenture (2016), the value of cross-border business-to-consumer (B2C) e-commerce amounted to USD 73 billion in Western Europe, USD 71 billion in Asia-Pacific, and USD 67 billion in North America in 2014. Such cross-border B2C e-commerce trade accounted for 12 to 18 percent of all B2C online transactions value in these regions. Asia-Pacific, in particular, has the highest rate of cross-border B2C e-commerce growth, with cross-border B2C e-commerce trade in the region projected to reach USD 476 billion, or 31 percent of all B2C online transactions value, by 2020.  

 

As cross-border B2C e-commerce is expected to likely emerge as a major shopping trend in the near future, a growing number of studies are being done on the subject in and outside Korea. The majority of these studies, however, explore these transactions in the interest of marketing, analyzing consumer motives for engaging in such transactions and the effects of consumers’ psychological characteristics (qualitative factors) on their attitude toward or willingness to make such transactions. In order to understand consumer behavior in cross-border B2C e-commerce better, however, we must not only pay attention to the subjective and psychological factors, but also to their objective attributes, the characteristics of the goods they purchase, price differences, and the obstacles and institutional factors involved. Few studies have addressed these topics so far. In this study, we seek to fill this gap in the literature by analyzing cross-border B2C e-commerce at multiple levels, and identify the variety of factors that lead to such transactions. Based on this understanding of Korean consumer behavior, we explore policy implications regarding cross-border B2C e-commerce.