South Korea is one of many countries that have been harmed by the dumping of excess low-priced products by China. After the South Korean government detected carcinogenic substances such as cadmium and lead exceeding standards by over 700 times in popular products from Chinese cross-border e-commerce platforms, the sales of these platforms in South Korea dropped by over 40% in April.
Global e-commerce platforms like AliExpress and Temu quickly increased their membership in South Korea by offering ultra-low prices, massive discounts, new member activities, and cash vouchers. However, due to the lack of safety assurance, trust in the products suffered a fatal blow, leading to a mass exodus of users.
According to a recent survey released by BC Card in South Korea, the sales of platforms like AliExpress and Temu in the South Korean market in April decreased by 40.2% compared to March, affected by the carcinogenic substance issue.
The decrease in sales was particularly noticeable in low-priced products. BC Card’s analysis of the April transaction data of AliExpress and Temu showed a 55.2% decrease in transaction volume for orders under 5,000 Korean won (about $3.7), a 42% decrease for orders between 5,000 and 10,000 Korean won (about $7.3), and a 35.2% decrease for orders between 10,000 and 30,000 Korean won (about $22).
Not only did sales decrease, but the number of new installations of users and applications also dropped. Data from igaworks, South Korea’s largest mobile data platform company, indicated a 40% user churn rate for Temu and 27% for AliExpress in April. The number of new installations sharply declined from 110,000 on April 1 to 50,000 on May 10 for Temu, and from approximately 33,000 to 16,000 for AliExpress during the same period.
The South Korean government announced in early April the detection of carcinogenic substances in products from AliExpress and Temu. The Incheon Customs under the Korea Customs Service announced on April 7 that out of 404 pieces of jewelry sold on these platforms, 96 pieces (24%) exceeded the standards by 10 to 700 times in cadmium and lead content.
Cadmium and lead are designated as carcinogenic substances by the International Agency for Research on Cancer (IARC). Cadmium poisoning can cause diseases in the respiratory, renal, and digestive systems, while lead poisoning can affect the renal, central nervous, digestive, and reproductive systems.
Additionally, on April 8, the Seoul Metropolitan Government conducted safety inspections on 31 children’s and household products that were bestsellers on AliExpress. It was found that 8 products (26%) exceeded the limit for phthalates plasticizers, with the highest level reaching 56 times the standard.
Furthermore, on the eve of Children’s Day in South Korea on May 5, the Seoul Metropolitan Government inspected 22 children’s products that were popular in South Korea, including those from AliExpress and Temu. The results showed that 11 products (50%) were deemed unsatisfactory, with some exceeding the standard for phthalates plasticizers by 324 to 348 times and lead content by 33 times.
Phthalates plasticizers are substances with reproductive toxicity that can lead to infertility. One of these plasticizers, di(2-ethylhexyl) phthalate (DEHP), is classified as a possible carcinogen (Group 2B) by the International Agency for Research on Cancer.
Moreover, on April 30, the Korea Customs Service revealed that among 252 children’s products sold by platforms like AliExpress and Temu at ultra-low prices, harmful substances were detected in 15%, with the highest exceeding the standard by 3026 times. The harmful substances included cadmium, lead, and phthalates plasticizers.
A survey conducted by the Federation of Korean Industries on 800 consumers who had used AliExpress, Temu, and Shine within the past year showed that 80.9% of users were dissatisfied or suffered losses while using these Chinese cross-border e-commerce platforms.
Results from a survey conducted by a consumer civic organization in South Korea among consumers who had used Chinese cross-border e-commerce platforms within the past year indicated that consumers believed these platforms offered no advantages other than price. Among dissatisfied consumers, the most common reason cited was poor product quality (64.3%).
In response to the issue of product quality on Chinese cross-border e-commerce platforms, the South Korean government promised to enhance inspection and management efforts.
According to a government official from the Office for Government Policy Coordination, the government has initiated the restructuring of regulations on overseas shopping products and decided to systematically carry out product quality inspections. So far, only individual units such as the Korea Customs Service and the Seoul Metropolitan Government have conducted quality inspections on overseas shopping products, but in the future, inspections will be expanded to multiple departments.
Furthermore, in mid-May, AliExpress and Temu signed an agreement with the Fair Trade Commission of South Korea to protect consumer safety, pledging to make efforts to ensure consumer safety and health. Despite the agreement including the requirement to disclose seller information, there are still numerous violations of undisclosed seller information on these platforms.
With the current economic downturn in China, many industries are facing overproduction, presenting significant challenges in boosting domestic demand. The export of excess products from China at ultra-low prices is shaking up the world trade market, with South Korea being one of the primary markets targeted by Chinese e-commerce.
Despite its relatively small land area and population, South Korea has a significant online shopping market. The online shopping market in South Korea reached 227 trillion Korean won (approximately $166.1 billion) last year, setting a historical record. Globally, South Korea ranks fifth in online shopping markets after the United States, China, Japan, and the United Kingdom.
With its proximity to China, high internet penetration, excellent logistics infrastructure, concentrated population in the capital region, convenient distribution, purchasing power, and sensitivity to trends, South Korea’s e-commerce market is significant.
Data released by Statistics Korea showed that China accounted for 48.7% of the total overseas direct purchases last year, marking a 121.2% increase compared to the previous year. In the first quarter of this year, China’s share of total overseas direct purchases reached 57%, showing a strong growth momentum.
Under the massive onslaught of Chinese cross-border e-commerce platforms, the South Korean e-commerce market is intensifying competition, and the leading e-commerce company Coupang in South Korea reported a loss in the first quarter after seven consecutive profitable quarters, signaling a warning for its goal of maintaining annual profitability for two years.
As of February this year, AliExpress and Temu ranked second and fourth, respectively, in terms of application users in South Korea.
It’s not only South Korean e-commerce enterprises that are affected but also the small and medium-sized enterprises (SMEs) producing these goods.
A survey conducted by the Korea Federation of Small and Medium Businesses in March on 320 SMEs that suffered losses due to direct purchases from Chinese e-commerce revealed that 80.7% of companies reported a decrease in sales or concerns about sales due to direct purchases from China.