Korea’s Shinsegae, China’s Alibaba to set up e-commerce joint venture

South Korea’s retail conglomerate Shinsegae Group has joined forces with Chinese online shopping giant Alibaba Group Holding Ltd. to better compete in Korea’s fast-paced online retail sector.

Shinsegae Inc. said in a statement on Thursday that it has forged a strategic partnership with the Chinese company and agreed to set up an e-commerce joint venture next year.

The joint venture, tentatively named Grand Opus Holdings, will be evenly split by the two partners.

E-Mart Inc. and Gmarket Inc., two online shopping affiliates of Shinsegae Group, said in their respective regulatory filings that Apolo Korea, a special-purpose company launched by E-Mart, and AliExpress International (Netherlands) B.V., an Alibaba Group affiliate, will establish the joint venture.

Under the deal, Shinsegae will invest its 100% stake in Gmarket into the new entity.

While AliExpress Korea and Gmarket will be incorporated into the JV, the two platforms will continue to be operated independently, according to Shinsegae.

“Through this joint venture that combines our domestic distribution know-how with Alibaba's e-commerce and IT capabilities, we aim to expand the sales channels for domestic sellers' products on a global scale,” E-Mart said in its regulatory filing.

WIN-WIN FOR BOTH

Analysts said the collaboration is a "win-win" for both Gmarket and Alibaba.

The partnership will allow Gmarket to leverage Alibaba's global sales network to help the 600,000 sellers on the Gmarket platform expand overseas.

Alibaba's e-commerce affiliates operate in over 200 countries and regions.

Gmarket will be able to leverage this network to help its sellers expand into major global markets such as China, the US, Europe, South America and Southeast Asia.

For Alibaba, the deal will enable it to expand its market share in Korea’s online shopping sector by luring Korean sellers and consumers to its platforms worldwide.

In recent years, Chinese e-commerce giants have increasingly attracted Korean consumers to their online platforms with cheaper products and sometimes faster deliveries than their Korean rivals such as Coupang Inc., Naver Corp., 11Street, SSG.COM and Gmarket.

Temu, a popular Chinese discount e-commerce platform that entered Korea in 2022, has cracked homegrown players’ dominance in the online retail space. AliExpress and fashion e-retailer Shein are also luring Korean consumers with ultra-low prices.

However, Chinese online shopping platforms have been plagued by persistent controversy over low-quality and counterfeit Chinese-made goods.

UPHILL BATTLE VS COUPANG, NAVER

With the domestic e-commerce market dominated by two leaders — Coupang and Naver Corp.'s Naver Shopping — Shinsegae is seeking new opportunities by forming a strategic alliance with Alibaba.

Shinsegae Group acquired Gmarket from eBay Inc. in 2021 for 3.44 trillion won ($2.3 billion), making the deal its largest-ever M&A. But the platform has since been losing money.

Gmarket has posted more than 100 billion won in losses over the past three years.

“Through their strategic partnership, Shinsegae and Alibaba will likely build an anti-Coupang alliance,” said an industry official.

In June, Shinsegae hired Alibaba Korea chief Chung Hyung-kwon, also known as Danny Chung, as chief executive of Gmarket.

Earlier this month, Alibaba Group invested 100 billion won in Korea’s top women’s clothes app operator Ably Corp., securing a 5% stake to tap into the nation’s booming online fashion market.

The investment, Alibaba’s first equity investment in a Korean shopping app platform, will enable the Chinese firm to gain a bigger foothold in Korea.

Write to In-Soo Nam at isnam@hankyung.com
Joel Levin edited this article.