This article was written on December 30, 2024 for the Chinese blog of Momentum Works on the Wechat platform, and was translated into English by the MW team.
In December last year, many Korean media outlets reported that Alibaba and South Korea’s E-Mart are planning to establish a joint venture. According to the reports, the joint venture will be equally owned by both parties (50%-50%). It will integrate E-Mart’s e-commerce platform Gmarket with Alibaba’s cross-border e-commerce business, AliExpress, in South Korea. The total valuation of the joint venture is estimated to be around $4 billion.
Some reports from Chinese media have tried linking this partnership to South Korea’s current political turmoil, which seems like quite a stretch.
In fact, E-Mart is part of Shinsegae Inc., one of South Korea’s three major retail groups, and is also one of the country’s largest supermarket chains. E-Mart previously operated in China but decided to exit the Chinese market in 2017 due to the THAAD incident, which refers to South Korea’s 2016 decision to deploy the U.S. missile defense system to counter North Korean threats. China opposed the deployment, citing security concerns over the radar’s ability to monitor its territory, leading to economic retaliation and a significant strain in Sino-South Korea relations.
The controversy surrounding the deployment of the THAAD in South Korea also triggered widespread public backlash in China, leading many Korean brands to face consumer boycotts or to withdraw from the Chinese market.
Apart from Shinsegae, the other two major retail groups in South Korea are the well-known Lotte and Hyundai.
Shinsegae Group’s Shareholding Structure and Background
The three major shareholders of Shinsegae Group are:
- Chung Yoo-kyung: Holds 18.56% of shares, Vice Chairwoman of Shinsegae Group.
- Korea National Pension Service (Government Pension): Holds 11.79% of shares.
- Lee Myung-hee: Holds 10% of shares.
It is worth noting that Lee Myung-hee is the daughter of Samsung founder Lee Byung-chul, the sister of former Samsung Chairman Lee Kun-hee, and the aunt of current Samsung Chairman Lee Jae-yong. Meanwhile, Chung Yoo-kyung is Lee Myung-hee’s daughter. Together, they hold a combined 28.56% stake and are the actual controllers of Shinsegae.
Lee Byung-chul and his daughter Lee Myung-hee in their earlier years.
Aside from these shareholders, no other shareholder owns more than 5% of the shares.
Gmarket’s Tumultuous Journey
Gmarket’s development has been fraught with challenges. It was founded in 1999 and successfully listed on Nasdaq but delisted in 2009 after being acquired by eBay. In 2021, eBay sold its South Korean e-commerce assets, including Gmarket, to Shinsegae Group.
Gmarket’s original founder, Ku Young-bae, went on to establish Qoo10 in Singapore. However, Qoo10’s e-commerce platform has recently been plagued by financial issues, culminating in South Korean police issuing an arrest warrant for Ku Young-bae.
At one time, Ku Young-bae was dubbed the “Jack Ma of South Korea.”
Last October, Shinsegae announced a restructuring plan to split the group into two independent entities: Shinsegae Department Store and E-Mart, managed respectively by Chung Yoo-kyung and her brother Chung Yong-jin. Currently, Chung Yong-jin is the largest shareholder of E-Mart, holding 18.56%, the same percentage that Chung Yoo-kyung holds in Shinsegae.
Chung Yong-jin (left) and Chung Yoo-kyung (right), the siblings.
Despite backing from a powerful conglomerate, Gmarket’s underwhelming performance has persistently weighed down the group’s overall business. This is likely one of the primary motivations driving Shinsegae to pursue partnerships.
It is worth noting that this approach of entering overseas markets by forming joint ventures with major local retail groups has been thoroughly explored in our recently published book, Seeing the Unseen: Behind Chinese Tech Giants’ Global Venturing. The book includes a detailed analysis of JD’s failed joint venture with Thailand’s Central Group, which provides valuable insights for further exploration.
Challenges Faced by Cross-Border E-Commerce Platforms in South Korea
In recent years, platforms like AliExpress and Temu from Pinduoduo have performed strongly in the South Korean market. Unlike air freight logistics in other developed countries, South Korea’s cross-border e-commerce platforms can leverage roll-on/roll-off shipping from ports in China’s Shandong province to enable maritime delivery. This approach offers comparable efficiency to air freight while avoiding capacity constraints typically associated with air transportation.
However, the large-scale import of cross-border e-commerce inevitably affects the interests of local retail industries and labor markets. As a result, the “pie” shared by political and business forces must be reallocated. This context helps explain why Temu has faced resistance in countries like Indonesia and Vietnam—challenges that stem more from policy protections and the need to balance interests, rather than the external narrative of counterfeit goods or quality issues.
Therefore, in markets where political and business forces wield significant influence, partnering with influential and capable local players is undoubtedly the wiser choice. Such collaborations not only reduce the risks of market entry but also provide local partners with access to technology, capital, and expertise. This model has also been the primary strategy employed by major Japanese corporations to expand into South Korea and Southeast Asian markets.
Lessons from Previous Cases
Alibaba’s partnership with Shinsegae bears some resemblance to TikTok Shop’s acquisition of Tokopedia in 2024. The difference lies in TikTok Shop’s urgency at the time to return to the market amidst policy bans, while Tokopedia was already struggling. In contrast, Gmarket’s shareholders are not in an existential crisis, though E-Mart’s continuous stock decline remains a headache.
Korean analysts hold differing views on this partnership—some believe Gmarket never had a clear strategy, so collaborating with Alibaba provides a more promising pathway. Others remain skeptical about whether the two companies can effectively synergize. After the announcement, E-Mart’s stock price dropped nearly 10%, while CJ Logistics, a partner of Gmarket, saw its stock price rise by over 5%.
In any case, clearly defining roles and managing expectations will be critical to the success of this collaboration. The ideal model would involve one party focusing on execution while the other provides resource support. If both parties attempt to handle execution, they must make significant efforts to avoid the pitfalls of the failed JD-CP Group joint venture in Thailand.
Nonetheless, it is foreseeable that today’s decision-makers have absorbed enough lessons from their predecessors. Alibaba and Shinsegae’s collaboration represents an attempt to achieve a win-win outcome for cross-border e-commerce and local retail giants. If successful, it could mark a new turning point for South Korea’s e-commerce market.
Now, let’s see if Temu has any other major strategies up its sleeve beyond its semi-managed and local-to-local models.
