Food and Drink E-Commerce in South Korea

2021 DEVELOPMENTS

Another dynamic year for food and drink e-commerce

After registering record-high growth in 2020, food and drink e-commerce continued to benefit from the increased demand for online grocery shopping. Although the rapid progress made by South Korea’s vaccination programme gradually instilled a greater sense of confidence amongst local consumers to spend time outside of the home towards the end of 2021, their habit changes in terms of food consumption, which has been greatly influenced by reduced outdoor activities including work from home and remote learning, has supported further strong growth for food and drink e-commerce.

Online channel gains share of fresh food sales

Historically, local consumers living in urban cities were in the habit of visiting large grocery stores for their shopping requirements once or twice a week and planned meals ahead due to hectic lifestyles. However, as consumers have gradually formed more sophisticated tastes in terms of meals, they are increasingly searching for diverse cuisines as alternatives to Korean-style dishes, ordering fresh ingredients such as imported beef and Western vegetables or meal kits in small batches.

Kurly and Coupang the major players in food and drink e-commerce

In 2021, Kurly Corp (Market Kurly) and Coupang, the two most popular players in South Korea’s food and drink e-commerce space, continued to record remarkable growth that far exceeded the channel’s average. Kurly’s positioning as a premium online grocery shopping platform targeting aspirational female consumers in their 30s has been well-received by those who are increasingly attracted to gourmet food, helping the company to differentiate from its competitors.

PROSPECTS AND OPPORTUNITIES

Bright prospects for online grocery shopping expected

Although there have been growing concerns that consumers will gradually return to physical stores once the threat of COVID-19 has waned, the convenience of online grocery shopping is projected to lock in existing customers as many of them have become used to having heavy grocery items delivered to their homes. The increasing number of single-person households and double-income households, which had supported the channel’s growth prior to the pandemic, will remain as the main driver, while the influx of new customers, such as the older population, should accelerate the expansion of food and drink e-commerce over the forecast period.

Supermarkets hold a competitive advantage in Q-commerce

Having witnessed the noticeable development of food and drink e-commerce, supermarkets are gearing up to adopt quick commerce services, delivering online orders to customers’ homes within 30-60 minutes of placing an order. Major players, including Lotte Fresh, GS Supermarket, and Homeplus Express, have introduced fast delivery services, while E-Mart Everyday also seeks to join the competition of hyper-fast delivery.

E-commerce is the new opportunity for traditional markets

In South Korea, most of the traditional markets are located in rural areas of the country, providing essential goods, especially fresh food and packaged food, to many South Korean consumers. Given that the older population accounts for a large share of customers, traditional markets had been slow to invest in digitalisation before the pandemic.