AliExpress, Temu and Shein catch S. Korean government off guard

The South Korean government has moved to take stringent action on Chinese online shopping platforms such as AliExpress, Temu, and Shein for their disruptive business practices in the local online retail market. It announced at a ministerial meeting on emergency economic issues on Wednesday that it will propose a revised bill to obligate them to designate domestic agents so that they can be fully responsible for protecting consumers. In case of any consumer complaints, they will be harshly punished for causing damage to consumers, just as local businesses. If they violate regulations regarding food, pharmaceutical products, high-price goods, material harmful to juveniles, and privacy protection, related government agencies will take joint action accordingly.

Chinese shopping businesses are taking up a growing market share by offering so low a price to consumers that local retailers cannot even compete. As of last year, AliExpress recorded 8.18 million consumers, only second to Coupang. With Temu and Shein combined, the total number of users totaled 14.67 million, showing a four-fold increase in a year. They have come under fire for selling fake and defective goods as well as harmful products that are banned locally. What's worse, they not only use visually graphic advertisements to lure consumers but also cause delivery delays and rejections of returns. The consequences of their detrimental business practices are being seen mainly by small-sized merchants importing and distributing imported goods and SMEs manufacturing low-price products.

Although the government has lately started taking action to protect consumers, it is still trying hard to develop ways to level the playing field. For example, local retailers must pay tariffs and value-added tax on imports and obtain safety certification, but Chinese platforms are not liable to do so. Given this, there are growing voices that regulatory blind spots should be removed to apply the same rules to overseas businesses.

The urgent need for reform lies in the outdated regulatory system hindering the growth of the Korean retail industry. After all, large-scale retailers have minimal leeway, as mandated holiday breaks and limited operating hours block them from providing dawn delivery services. In contrast, their Chinese competitors are moving nimbly to sell fruits and vegetables in the South Korean fresh food market. Critics argue that large companies' regulatory hurdles harm the local retail industry’s competitiveness and put consumers and mom-and-pop stores at a disadvantage.

Chinese online shopping platforms disturb the global consumer market and retail environments so recklessly that they are criticized for dumping their vast excess on the world, which is also referred to as “deflation export.” To protect against such dumping business practices, the South Korean government should lessen regulations on domestic businesses and upgrade industrial competitiveness in retail, manufacturing, and logistics. Indeed, it is not just a mere concern that the foundation of domestic retail and low-price manufacturing industries may be shaken if things are left unhandled.