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What Could be Koreans' Strategies admist Chinese Market Surge?
  • By Kim Min-seong, reporter
  • 승인 2024.03.31 14:52
  • 호수 330
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▲ Temu’s Super Bowl Advertisement (Source: Temu’s Official Youtube Channel)

The explosive growth of Chinese companies is devouring the world. Chinese e- commerce companies such as SHEIN, Aliexpress, and Temu, which boast cost- effectiveness, all rank within the top 10 in the shopping application category of Google Play Store and Apple Store. Among them, Temu, which first entered the US market in 2022, is particularly notable for its rapid growth. According to a report by Sensor Tower, a market analysis firm in the United States, it took only one year for Temu to gather 51 million active users in the US. This is something that took Amazon at least a decade. Chinese companies are not only growing in the distribution industry but also in technology. According to the '2022 Technology Level Assessment' announced by the Ministry of Science and ICT, China surpassed Korea for the first time in 11 key technological areas. The growth of Chinese companies armed with low prices and technology is threatening Korean companies.

Temu, which promotes the motto, "Shop Like a Billionaire," is a subsidiary of 'Pinduoduo Holdings' that achieved success through group purchasing on WeChat. In 2018, Pinduoduo successfully went public on the NASDAQ exchange, just three years after its launch. Then in 2022, it launched Temu, a shopping app targeting the global market. Pinduoduo's factory, 'Pin Factories (拼工厂),' are well known in the industry as a textbook example of distribution innovation through the C2M (Custom- to- Manufacturer) Business Model. The C2M Business Model refers to a process where platforms like Temu analyze consumer opinions through big data and AI, and transmit them to factories to produce products, rather than brands or factories planning products in advance. Leveraging AI for customer preference surveys, inventory analysis, and pricing, Temu reduces costs and produces cost- effective goods by combining world- class manufacturing technology. Furthermore, it attracts consumers with unconventional management policies such as offering discount coupons to new subscribers and enabling free shipping and unconditional returns within 90 days.

After the Chinese government called for 'China's Technology Rise,' growth in the technology sector has also been fierce. According to the Global R&D Top 1,000 Companies report by FKI (The Federation of Korean Industries), the number of Chinese companies increased from 19 to 194 between 2006 and 2020, a growth rate of about 50 times. This is a significant gap compared to Korea, which grew from 4 to 27 companies during the same period. The growth of Chinese technology is also affecting Korea's future industries. For example, in the electric vehicle market, CATL and BYD, which focus on manufacturing LFP batteries with good cost- effectiveness, have secured the top two positions in the global market. Based on these achievements, Chinese electric cars recorded a growth of over 13 times in 18 major European markets last year compared to the previous year in 2023. They are also making an inroad into the domestic electric bus market. According to data from Carisyou Data Lab in 2023, the market share of newly introduced Chinese electric buses surpassed that of Korean- made ones, accounting for 50.9% compared to 49.1% of Korean- made ones. This is because Chinese electric buses have longer driving ranges and are priced over 100 million won cheaper. In such a market situation, investment banks like UBS anticipate demand for LFP batteries from companies like Tesla, and Korean battery companies that were usually focusing on Ternary Lithium- ion Battery batteries, are also accelerating their efforts for the LFP market.

The government is also seeking countermeasures against the moves of Chinese companies. In February, the government held a conference on the impact of overseas platforms on the domestic online market to discuss countermeasures against overseas e- commerce companies. As a result, the Ministry of Trade, Industry and Energy announced its plan to establish an 'Online Distribution Monitor Team' on the 20th to explore countermeasures for the domestic online distribution industry. In addition, a government official from the Ministry of Science and ICT said in an interview with the Hankyoreh newspaper, "To maintain the technological gap and secure essential technologies for future survival, we will identify the strengths and weaknesses of each technology and policy demand by field and establish technology strategies.” The government's proactive response will serve as an important foundation for Korean companies to gain an advantage in global competition and strive for survival and growth in future markets.

By Kim Min-seong, reporter  kms9494274@gmail.com

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