Korea-Distribution-and-Sales-ChannelsKorea - Distribution and Sales
South Korea’s geography is 70 percent mountains, and the country’s nearly 50 million people are concentrated in five key population centers: 1) Seoul metro area; 10+ million; 2) Busan metro area: 3.5 million; 3) Incheon metro area: 2.9 million; 4) Daegu metro area: 2.5 million; 5) and Daejeon metro area: 2 million. Most freight forwarders use an extensive network of first-class railways, 3,000 kilometers of highways, and air routes that crisscross the country.
Incheon, Gimpo, and Busan’s first-class airports and ports are the points of entry for most products. Products are then transferred by highways and railways to major modern distribution centers in Seoul, Busan, Incheon, Daegu, and Gwangyang. South Korea has 15 airports. Eight are international airports, including the world-class Incheon International Airport near Seoul. Around 77 international passenger and cargo airlines operate regularly scheduled flights between Korea and many nations around the world (see Chapter 4 of this report for additional information on Korea’s airports).
The Port of Busan is the world’s fifth largest cargo port. In addition, Incheon Airport Terminal 2 opened in January 2018 and a new airport in Jeju is being planned.
Distribution methods and the function of intermediaries vary widely by product in this mature market. Traditional retail distribution networks comprising small family-run stores, stalls in markets, and street vendors are being replaced by large discount stores.
In mid-2012, as part of Korea’s efforts to protect small “mom-and-pop” stores, under the auspices of “economic democratization,” the government imposed a rule closing big-box discount chains on two Sundays per month. Many major retailers initially ignored the restriction. The government then imposed financial penalties, which eventually led to compliance, with major retailers closing stores on the second and fourth Sunday of each month, as of late 2012.
Korea’s major cities have numerous fashionable and expensive department stores and boutiques. There are also thousands of second-tier and third-tier retail stores. Full-line discount stores (FDS) have also increased in popularity in recent years. U.S.-based Costco, which entered the Korean FDS market more than 10 years ago, is successfully competing against Korean rivals E-Mart, Lotte Mart, and Homeplus.
The rapid expansion of discount chain stores is planned nationwide, with suburban satellite cities attracting the greatest number of stores. Distribution of goods through large discount chains is one of the best ways to market foreign products to Korean consumers.
It should also be noted that parallel imports can legally enter Korea. Many U.S. companies continue to give exclusive contracts, since territorial limits in neighboring countries enhance the value of an exclusive area in any one country. Any parallel importer in Korea, not receiving the support of the original equipment manufacturer (OEM), and not moving a meaningful volume of product, cannot be guaranteed a steady source of income. The legitimate exclusive distributor still has considerable advantages in Korea.
A handful of Korea’s highly successful and sophisticated retailers have contacted CS Korea from 2012 to the present, seeking introductions to U.S. name-brand retailers and anchor stores for their respective three-to-five year mall construction plans.
In April 2015, CS Korea completed a 16-page International Market Insight (IMI) report, describing how Koreans make purchases via foreign online retailers. This document can be found under ‘market research’ on the CS Korea website https://www.export.gov/article?id=Korea-eCommerce.
Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.
Incheon, Gimpo, and Busan’s first-class airports and ports are the points of entry for most products. Products are then transferred by highways and railways to major modern distribution centers in Seoul, Busan, Incheon, Daegu, and Gwangyang. South Korea has 15 airports. Eight are international airports, including the world-class Incheon International Airport near Seoul. Around 77 international passenger and cargo airlines operate regularly scheduled flights between Korea and many nations around the world (see Chapter 4 of this report for additional information on Korea’s airports).
The Port of Busan is the world’s fifth largest cargo port. In addition, Incheon Airport Terminal 2 opened in January 2018 and a new airport in Jeju is being planned.
Distribution methods and the function of intermediaries vary widely by product in this mature market. Traditional retail distribution networks comprising small family-run stores, stalls in markets, and street vendors are being replaced by large discount stores.
In mid-2012, as part of Korea’s efforts to protect small “mom-and-pop” stores, under the auspices of “economic democratization,” the government imposed a rule closing big-box discount chains on two Sundays per month. Many major retailers initially ignored the restriction. The government then imposed financial penalties, which eventually led to compliance, with major retailers closing stores on the second and fourth Sunday of each month, as of late 2012.
Korea’s major cities have numerous fashionable and expensive department stores and boutiques. There are also thousands of second-tier and third-tier retail stores. Full-line discount stores (FDS) have also increased in popularity in recent years. U.S.-based Costco, which entered the Korean FDS market more than 10 years ago, is successfully competing against Korean rivals E-Mart, Lotte Mart, and Homeplus.
The rapid expansion of discount chain stores is planned nationwide, with suburban satellite cities attracting the greatest number of stores. Distribution of goods through large discount chains is one of the best ways to market foreign products to Korean consumers.
It should also be noted that parallel imports can legally enter Korea. Many U.S. companies continue to give exclusive contracts, since territorial limits in neighboring countries enhance the value of an exclusive area in any one country. Any parallel importer in Korea, not receiving the support of the original equipment manufacturer (OEM), and not moving a meaningful volume of product, cannot be guaranteed a steady source of income. The legitimate exclusive distributor still has considerable advantages in Korea.
A handful of Korea’s highly successful and sophisticated retailers have contacted CS Korea from 2012 to the present, seeking introductions to U.S. name-brand retailers and anchor stores for their respective three-to-five year mall construction plans.
In April 2015, CS Korea completed a 16-page International Market Insight (IMI) report, describing how Koreans make purchases via foreign online retailers. This document can be found under ‘market research’ on the CS Korea website https://www.export.gov/article?id=Korea-eCommerce.
Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.