“We consider South Korea as a developed market, meaning it really is no different to the united kingdom or the US… Korean individuals are demanding and expect high-performing products.” Hari Nair: Managing Director, Kimberly-Clark’s.
Recently everything seems prefixed with a K: K-Pop, K-food, K-beauty, K-movies; you will want to go to your local K-culture festival, sure there must be one in your area, or just around the corner. Korean culture is on fire at the moment and has been warmly received. Domestic franchisors have, quite rightly, been riding this wave and rapidly expanding internationally-China being truly a Korea franchisors first choice. But also for an overseas franchisor looking in, what’s this market like?
GDP was US$1.2 trillion in 2013 and 韓國代購 predicted to go up as consumer spending and confidence grows through 2014 and 2015. The Hyundai Research Institute latest report predicts Korea will expand by 3.5% in the first 1 / 2 of 2015 and 3.6% in the second half.
Considering Korea’s comparatively slower Asian growth, it remains an excellent target for franchisors owing to historical years of stable growth, an affluent consumer base and early advancement of the country. The common disposable income per household monthly was US$3150 in the next quarter 2014, a rise of 2.8% from the second quarter 2013, with significant rises in bakery, confectioneries & snacks, coffee & tea, and juice & beverages sectors (Statistics Korea).
The demand for foreign brands spans a range of sectors and recently a broader selection of channels. 65% of the population is classified as middle-class (OECD) so unlike many other Asian countries there is not the general trend of a new, emerging middle-class. Supported by media and a relatively high amount of travel experience, the Korean consumers are knowledgeable in a developed, globalised market.
Korean consumers have a solid purchase history of foreign brands so as well as valuing money, they will have a high understanding of brand philosophy and marketing channels. They will readily try new products and so are always seeking new tastes and ways to improve their lifestyle and image.
For a franchisor, the marketing must be more sophisticated to complement the level of the consumer. For example, nearly 80% of the population is online, rendering it the most connected country on the planet! and they love their credit cards. Annual credit card transactions are over 65% higher than the united states. This combination means a high proportion of online spending and retail ecommerce is predicted to the touch $25.3 billion by 2017 (Borderfree). Any online marketing strategy needs to be multi-channel and use areas of social media to advertise brands and make use of the technology to offer better shopping channels and delivery.
. Korea’s population is ageing and urbanized. The median age in 2012 was 39.1 years and the over 60 group is predicted to take into account nearly 25% of the populace by 2020 (Statistics Korea). Some franchisors may already target this older market whereas others may be able to easily adapt or extend to focus on this group. However for ordinary people do not despair, as PwC reminds us, 70% of the populace remain within most retailers target demographic of 15-64 years old.
With over 90% of the population living in urban areas, these conurbations are massively populated, wealth dense spaces and retail premises come at reduced. The 4 main population areas: Seoul metro-15 million, Busan metro-4 million, Daegu metro-3 million, and Daejeon metro-2 million.
Key retail players are set to open mega malls outside of the main cities on the coming years but presently Gyeonggi (the area directly surrounding Seoul) and Seoul account for 42% of the full total shop space in all Korea (www.kintex.com). Supermarkets and hypermarkets lead retail channels which lead will increase since it matches the 3 main purchase drivers of preference, convenience and price.
Despite economies of scale enabling big shopping complexes to effectively compete with smaller stores, operators are always seeking to differentiate themselves from each other. Enhancing shoppers experience by offering the most recent trend brands certainly are a main way they do that. They are not only searching for exciting overseas tenants, these operators may also be willing to take on Master agreements and roll out concepts across their formats.
If that is an entry strategy of interest, be aware that these companies are looking for a brand that will drive traffic, therefore the service or product either has to an established name or have a solid unique factor attached to it. Quirky with long term viability can be good USP and malls, a very effective solution to introduce your brand into Korea-mainly as the cost of educating the populace will be borne by the mall operators and you may be assured it’ll be done with a high level of proficiency.
The franchise market in 2013 was estimated at US$89.8 billion with nearly 3,000 franchises. There have been 283 retail franchises, 601 service franchises and 2,089 food service franchises (export.gov). Even with recent downgrades of GDP, the franchise industry has displayed respectable growth over recent years with on average 200 new franchises opening annually since 2010.
Koreans are very open to partnering with overseas franchisors, especially with those that have an existing reputation in Korea or core values which reflect their origin country. Koreans aged 55 and over have recently proved themselves to be good franchisees because they have more capital and knowledge, and being a family orientated culture, will pass the business down to their children. The franchise industry regulations ensure business generally runs smoothly and Korea is undoubtedly a straightforward place to franchise into.
