Shinsegae and Alibaba have announced the formation of a significant joint venture valued at approximately $4.1 billion to consolidate their presence within the fiercely competitive South Korean e-commerce market. This strategic partnership, set to launch in 2025, will see the integration of the platforms of both companies—Gmarket and AliExpress Korea—while allowing them to maintain independent operations.
On December 26, Shinsegae Group confirmed the collaboration, stating the joint venture will be evenly split, with both companies holding 50% ownership. According to the regulatory filings, Shinsegae will contribute its entire stake in Gmarket, which it acquired from eBay Korea for 3.44 trillion won ($2.3 billion) in 2021. Meanwhile, Alibaba plans to invest 300 billion won cash, alongside its contributions from AliExpress Korea, to kick off what has been dubbed the Grand Opus Holdings venture.
This partnership marks Shinsegae's response to increasing competition from other South Korean e-commerce giants such as Coupang and Naver, as well as challenges posed by foreign entities like AliExpress and Temu. Despite Gmarket's potential, it has been struggling to compete, having reported significant operating losses over recent years; only noting slight profits of 200 million won in late 2023.
Gmarket's Chief Executive, Chung Hyung-kwon—who transitioned from his previous role at Alibaba Korea—maintained the company’s direction moving forward, asserting, “The operation of Gmarket will not change massively,” ensuring employees of the stability within the company.
One of the key goals of this venture is to leverage Alibaba's extensive international sales networks to aid Gmarket sellers, comprising around 600,000 merchants, to expand their reach beyond Korea. By using Alibaba's infrastructure, these vendors could potentially access global markets, including the U.S., Europe, and Southeast Asia.
“Through our domestic distribution know-how combined with Alibaba’s e-commerce and IT capabilities, we aim to expand the sales channels for domestic sellers' products globally,” stated E-Mart, Shinsegae’s affiliate. This collaboration is expected to create synergies as both entities bring different strengths to the table.
The competitive Korean e-commerce sector has become increasingly crowded, with the presence of major players like Coupang and the newcomers from China such as Temu offering some challenges. Shinsegae's strategic move to collaborate with Alibaba is seen as an effort to build what many analysts could dub as “an anti-Coupang alliance,” offering local sellers routes to compete effectively with cheaper foreign counterpart offerings.
Examining the existing struggles of Gmarket against major rivals reveals why this partnership is deemed necessary. Analysts note, “Gmarket has posted more than 100 billion won in losses over the past three years,” emphasizing the urgency for Shinsegae to innovate and collaborate to remain relevant.
Even as Chinese e-commerce platforms like AliExpress have gained traction among South Korean consumers due to lower pricing and rapid delivery, they’ve also been criticized for quality concerns. This juncture creates both opportunity and risk for the new venture, which aims to capitalize on Chinese market efficiencies whilst ensuring quality through Shinsegae’s expertise.
Another noteworthy aspect of this partnership is the technological enhancement expected to occur at Gmarket. Utilizing Alibaba's advanced IT abilities will bolster Gmarket’s infrastructure, significantly improving user experiences through enhanced technological adaptation, according to Shinsegae's projections. They anticipate, "With Alibaba International and its stable investments to come, consumer items at Gmarket will have more variety, prices will become more affordable, and shopping on the platform will become more customized and convenient.”
The joint venture proposal signifies Shinsegae's ambition to deepen its foothold within Korea’s growing online marketplace and broaden the exposure of Korean products globally through Alibaba’s expansive network across 200 nations. It's not just about improving internal efficiencies; it’s about creating connections to potentially vast new markets.
This venture also aligns with Alibaba's initiative to reinforce its operations within Korea. Earlier this year, Alibaba Group announced plans to invest $1.1 billion strategically over the next three years, underlining its confidence and commitment to the Korean market.
To sum up, the joint venture between Shinsegae and Alibaba is expected to rejuvenate the commercial strategies employed by Gmarket, providing both sides with much-needed tools to tackle the competitive e-commerce terrain effectively. The anticipated alignment not only aims to solidify their market presence but seeks to establish new avenues for local sellers eager to export their products on a global scale, showcasing the dynamism of the e-commerce evolution.
