‘Amazon effect’ plagues South Korean economy
E-commerce businesses are rapidly boosting their presence in South Korea’s domestic retail market
By Yoon Sung-won
The explosive penetration of e-commerce is expanding low-income jobs and thus is undermining the national economy of Korea in general.
Through fierce price wars between internet commerce giants and traditional brick-and-mortar retail businesses, the latter have been forced lower the salary or have gone bankrupt amid dwindling margins. This has created a vicious cycle of tough price competition and lower salaries. Such a phenomenon has been called the “Amazon effect.”
The Amazon effect is increasingly shadowing many small enterprises and self-employed businesses, making it more difficult for them to escape from having to pay their workers the low wages.
According to the Ministry of Trade, Industry and Energy e-commerce businesses are rapidly boosting their presence in the domestic retail market. Internet open market services such as Gmarket, Auction and Interpark, and social commerce businesses including Coupang, Ticket Monster and WeMakePrice recorded 18.1 per cent average sales growth rate year-on-year in 2016, up from 16 per cent in the previous year.
In the meantime, consumers are also spending more through e-commerce. According to the Bank of Korea, individual consumers spent about 5.5 trillion won in May this year on internet shopping. This was the largest amount of spending since the central bank started to establish data on this in 2009.
