South Korea’s online shopping market experienced its slowest growth rate in July, posting a year-on-year increase of just 5.4%. According to data released by Statistics Korea on September 2, the decline in growth can be attributed to issues such as e-commerce debts and extreme weather conditions.
Background and Context
The report, titled July 2024 Online Shopping Trends, revealed that the total online shopping spending in July reached 19.9626 trillion won (approximately 106 billion yuan), marking the lowest growth rate since the start of related statistics in January 2017. Analysts believe that the primary reasons for this decline are the debt crises faced by major e-commerce platforms such as TMON and WeMakePrice, which have eroded consumer confidence in online shopping.
Impact of E-Commerce Debts
The debt crisis involving TMON and WeMakePrice has had a significant impact on the overall online shopping market. These platforms, which are among the largest in South Korea, have faced accusations of failing to pay their suppliers and sellers on time. This has led to a loss of trust among consumers, who are now more cautious about making purchases online. The uncertainty surrounding these platforms has discouraged spending, contributing to the slower growth rate.
Weather Conditions
In addition to the e-commerce debts, extreme weather conditions have also played a role in the decline. South Korea experienced a period of high temperatures and heatwaves in July, which may have deterred people from shopping online. During such conditions, people are more likely to stay indoors and avoid making non-essential purchases.
Specific Categories and Trends
Despite the overall slow growth, some categories saw an increase in online spending. Food and beverages, dining services, and daily necessities categories led the growth, with dining services reaching a historical high. Online spending on communication devices and automotive products also saw significant increases.
However, there were notable declines in other categories. The spending on electronic coupons dropped by 31%, while sports and leisure goods and cultural and entertainment services saw decreases of 6.8% and 0.2% respectively.
Mobile Shopping Continues to Grow
One positive trend amidst the slow growth was the continued increase in mobile shopping. Mobile shopping spending grew by 6.9% year-on-year, reaching 15.1173 trillion won. Mobile shopping now accounts for 75.7% of total online shopping, up from 74.7% the previous year.
Government Response
The South Korean government has been actively addressing the issue of e-commerce debts. In response to the crisis, the government has announced plans to provide financial support of 86 billion won to affected businesses. This move is aimed at stabilizing the market and restoring consumer confidence.
Conclusion
The slow growth in South Korea’s online shopping market in July is a reflection of broader economic and environmental challenges. The e-commerce debt crisis and extreme weather conditions have combined to create a cautious consumer environment. However, with the government’s intervention and the continued growth in mobile shopping, there is hope that the market will recover in the coming months.
As South Korea navigates these challenges, it will be crucial for e-commerce platforms to rebuild trust and for the government to continue supporting the industry. The online shopping market remains a vital component of the country’s economy, and its recovery will be closely watched by both businesses and consumers alike.
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