Asia awakes to e-commerce

Dec. 21, 2004
Web retailers worry South Korean car dealers, stockbrokers.

Asian consumers awoke to the power of the Internet in 1999, logging on to buy everything from clothing to cars. This year retailers that target consumers are honing their messages, and corporations that sell to other businesses are leaping online. In South Korea salespeople already are feeling the Web's impact. Car dealers and stockbrokers are especially nervous. "I begin to fear that the Internet might take my job away,'' laments Song Jin-Ho, a salesman at a Hyundai Motor Co. dealership in Seoul that he says is selling only 52 cars a month, down from 68 a year ago. He attributes the decline to the 10 Web-based auto malls that have popped up since November 1999. "I believe that this is only a prelude to something much worse,'' he says. Song recently sold a Hyundai EF Sonata 2.0 for approximately US$15,750 to Kim Sang-Ho, who still values his connection with the car dealer. "This is not about cheap things like books or CDs but about a functioning, expensive product that I need to have someone else care for,'' says Kim, referring to aftersales service. But Jong Sung-Ja, president of an Internet software vendor, switched to a cyberdealer -- -- that offers an estimated $270 discount for the same Hyundai EF Sonata 2.0. "I know the car model very well, and I do not want to lose time that could be spent growing my business in talking to a salesperson,'' she says. Similarly, Shin Jong-Ho bought a Hyundai over the Web. "I would feel sort of guilty if I walked into a dealer and asked him every detail on the car and walked away without buying it,'' he says. Instead, he turned to, which like the rest of its online competitors sells only Korean models for now. In South Korea, where about 18% of the population of 47 million have computers, Internet auto malls are mushrooming. A recent survey by Chosun newspaper revealed that each sold an average of 255 cars monthly versus 52.1 cars at brick-and-mortar dealers. Some 1.1 million passenger cars are sold annually in the country. "Someday more than 80% of cars will be sold via the Internet malls,'' predicts Joo Woo-Jin, professor of business management at Seoul National University. In Korea, the three automakers -- Hyundai, Daewoo Motor Co. Ltd., and Kia Motors Corp. -- sell most of their cars through their own dealerships at a fixed price, with only a few cars sold through independent small retailers. One advantage for consumers buying from cyberdealers is the variety of autos they can see in one place. To gain access to products, Web retailer teamed up with some 100 traditional car dealers, which provide the cyberdealers with cars. Profits are slim for the cybersellers, however -- as little as $180 on each car. If Web retailers can survive on slim margins, the jobs of many salespeople who can't figure out a way to provide service could be at risk. Some 30,000 car dealers owned by the three automakers have asked the manufacturers to do something to fend off the growth of the online retailers. "Our car dealers have sleepless nights fearing they may lose their jobs,'' warns Lee Hyo-Sun, sales team leader of the Hyundai Motor labor union. Car makers and dealers have promised to sue their Web competitors for selling vehicles at low prices that disrupt the way traditional business has been done, but no one is optimistic about the results. Car dealers aren't the only ones having sleepless nights. Salespeople in the securities industry also are worried. "Compared with one year ago, I have only half the number of customers who used to come to me for stock advice,'' says Kim, a salesperson in a securities company in Seoul. Today, online stock trading in Korea accounts for as much as 70% of turnover in the country, up from only 5% to 10% a year ago. Other Korean industries to be hit by the Web are insurance, banking, and consumer electronics, predict experts. In April, the online insurance industry should take off when the government recognizes electronic signatures as legal. In the business-to-business arena, Samsung Corp. has been a leader in introducing e-commerce. Its cyberwarehouse, the Merchant System that went live in July 1999, allows business customers to order goods from several product lines over its site.

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