MotionPoint’s Countdown to Black Friday is here! To celebrate the recent publication of our exclusive report on Hispanics and Thanksgiving week shopping, we’re examining unique aspects of consumer behavior all over the world. Today, we conclude our series with a trip to South Korea!
America isn’t the only country that drives consumers crazy with bargains after a holiday feast.
In October, South Korea hosted its spin on Black Friday, held after Chuseok (추석), the country’s Thanksgiving-like celebration. The two-week sales event was initiated by the government to boost domestic spending after a summertime outbreak of Middle East Respiratory Syndrome killed nearly 40 people, and reduced retail spending by 12% in June and another 6.5% in August.
The Black Friday specials provided temporary relief—sales surged by nearly 25% from a year prior. But many Korean shoppers were still disappointed by the sales event, despite deep discounts of up to 80%.
Why? Despite such dramatic price cuts, products were still much pricier than what consumers could find online from international retailers. The Korean retail industry is controlled by a few conglomerates that leverage their power to lock up exclusive distribution deals. As a result, consumers are stuck with fewer choices and substantially higher prices.
To combat these artificially-inflated prices from local retailers, Koreans are increasingly engaging in a shopping phenom called jikgu—buying products from foreign e-commerce sites. As well they should: on average, Koreans pay 174% more than Western shoppers for the same apparel.
The convenience of online buying is fueling a shift in Korean buying habits. More Koreans are shopping online on domestic e-commerce sites, too, fueling double-digit growth in Korean e-commerce. September retail sales saw year-over-year growth of 4.1%. Meanwhile, online e-commerce sales rose 18.3% in the same period. Mobile e-commerce grew by 56.6%.
Breaking out that growth by sector sheds even more insight into shifting Korean consumer behavior:
Ranked third among OECD nations for average annual hours spent working, Koreans put a premium on leisure time. Long trips to the store have been replaced by quick checkouts while browsing at home, or during the morning train commute. Nowhere is this trend more apparent than the shift towards online shopping for such products as cosmetics, shoes, and apparel. While retail sales are contracting, online sales are rocketing ahead.
How can your brand get in on the action? It starts with understanding Korean customers and their culture. Here’s a success story from a MotionPoint client—a Western e-retailer that’s especially savvy with international promotion. This company connected with Korean customers in a big way, during a local holiday. Each Nov. 11, Koreans celebrate Pepero Day (빼빼로데이), a holiday in which sweethearts and loved ones exchange chocolate-covered cookie sticks, similar to chocolate on Valentine’s Day.
Our client launched a simple campaign to promote its site during Pepero Day 2014. Through its email newsletter, and pay-per-click advert spends on Google and Korean search engine Naver, the company spread the word about a Pepero Day sales event, valid exclusively on Nov. 11.
The results from this one-day event were powerful. Among Koreans, traffic grew 360% over the average daily. Transactions saw a ten-fold increase. Shoppers spent more, too: average order value grew by nearly 50%.
In fact, the promotion was so savvy, the client’s website generated nearly 5% of its annual revenue from Korean shoppers in a single day. Perhaps even more astonishing: this company doesn't have a localised website for the Korean market. This traffic and revenue was funneling into the company’s English e-commerce site.
We’re confident this retailer would have seen even more successful results, had it worked with a translation service company to directly support Koreans.
The success of this company's Pepero Day campaign didn't just boost sales and revenue. Authentic, culturally-resonant marketing campaigns build customer loyalty, too. And every retailer knows that customer loyalty translates to larger order values from repeat customers.
This is exactly what played out with our client, during Pepero Day 2015. This November marked an interesting shift in consumer behavior. Pepero Day 2015 saw 25% less traffic than last year's holiday campaign. (This is likely due to a smaller marketing and advert spend, promoting the Pepero Day deals.) Despite this lower traffic, holiday revenue increased 30%.
This year, returning visitors outnumbered new ones. These loyal customers fueled the discount frenzy, nearly doubling conversion rates compared to last year's already robust holiday campaign.
This year's Pepero Day campaign also points to another emerging trend among Korean bargain hunters. Although many shoppers still waited until the final moments of the promotion to make a purchase, 2015 saw a shift towards morning purchases. Fewer consumers embraced the feverish "first to buy" rush of post-midnight and wee-hours shopping, and instead made more purchases after breakfast and during the afternoon.
Koreans also took full advantage of their international e-commerce knowledge to maximise the holiday discount. Average order value this year came in just below the import duty threshold (150,000 won; about $130), allowing Koreans to enjoy their overseas goods tax-free.
Providing authentic shopping experiences really moves the sales needle among South Koreans and other international consumers. This requires an in-depth knowledge of the market, and the localisation skills to cater to those shoppers in their preferred language and channels.
If you're considering entering the Korean market online, be sure to leverage a localisation platform that provides a wide breadth of expertise, from translation to culture-and beyond.