Sales on Chinese cross-border e-commerce platforms in South Korea have dropped significantly after carcinogens were discovered in some popular items.
South Korea, known for being a key market for China’s surplus low-cost products, witnessed a sharp decline in sales on platforms like AliExpress and Temu due to dangerous levels of cadmium and lead detected in goods. According to a recent survey by South Korea’s BC Card, sales from these platforms plummeted by 40 percent in April.
Initially capturing the South Korean market with attractive prices and discounts, the Chinese e-commerce giants failed to ensure product safety, eroding consumer trust and leading to a mass exodus of users.
The decline was most noticeable in the low-priced product categories.
BC Card’s analysis of April transaction data revealed a significant decrease in transaction volume for orders below 5,000 Korean won ($3.70), with a 55.2 percent drop. Orders between 5,000 and 10,000 won ($3.70 to $7.30) saw a 42 percent decrease, while orders between 10,000 and 30,000 won ($7.30 to $22) decreased by 35.2 percent.
The impact extended beyond sales to user numbers and new app installations. IGAWorks data showed a 40 percent user attrition rate for Temu in April and a 27 percent attrition rate for AliExpress. New Temu installations dropped from 110,000 on April 1 to 50,000 by May 10, while AliExpress installations decreased from around 33,000 to 16,000 during the same period.
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Intense Pressure from Chinese E-Commerce
China’s economic downturn has led to overproduction in many industries, prompting the export of surplus products at extremely low prices. This has disrupted the global trade market, with South Korea emerging as a major target for Chinese e-commerce.
Despite its small size, South Korea boasts a significant online shopping market with high internet penetration, excellent logistics, and a concentrated population, making it an attractive market for e-commerce. Consumers in South Korea are known for their purchasing power and trend sensitivity.
Statistics Korea data showed that China accounted for a large portion of last year’s overseas direct purchases by South Korea, indicating a growing trend. In the first quarter of this year, China’s share increased further, reaching 57 percent.
The aggressive expansion of Chinese cross-border e-commerce platforms has intensified competition within the South Korean market. Leading e-commerce company Coupang reported an operating loss in the first quarter of this year after seven consecutive quarters of profitability, raising concerns about its annual profitability goals.
As of February, AliExpress and Temu ranked second and fourth, respectively, in terms of app users in South Korea.
The impact extends beyond e-commerce companies to small and medium-sized enterprises (SMEs) producing these products, with a survey revealing that a significant number of affected SMEs reported decreased sales or anticipated declines due to direct purchases from Chinese platforms.
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