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South Korea Moves to Restrict Young People's Online Overseas Shopping

Image by Flickr user  Marcia Furman (CC BY-NC-ND 2.0)

Image by Flickr user Marcia Furman (CC BY-NC-ND 2.0)

Buying online from foreign sellers is one of hottest trends among young South Koreans at the moment, with last year's total purchase reaching one trillion Korean won [ko] (about 0.9 billion US dollars). Making web purchases allows shoppers to get their hands on products not available in the country or products from Korean brands but at much cheaper prices. 

But the trend has now drawn ire from the Korean government, which recently proposed a bill that would blacklist [ko] Koreans whose quarterly international purchases made via credit card exceeds 5,000 US dollars as an effort to protect the local economy.  

There are three major ways [ko] that young Koreans are buying from abroad online. First, small agencies or brokers take care of the purchasing process normally for a 10 percent service fee on transactions. Second, small businesses and individuals let customers use their US address and they only handle shipping.

Third, customers buy products through the international sellers’ websites using their Korean address. It is this third type of purchase, known in Korean as “Haeoi-jikgu” (translation: “direct oversees purchase”) is what is rapidly gaining traction in the country. This means they have to pay the expensive shipping prices of sites like Amazon, eBay and Drugstore.com, yet the total usually comes out cheaper than buying the product from domestic vendors.

Korean online communities have even opened up new sub-categories dedicated to this type of purchase, where online users can share tips about how to buy, what things to be aware of and how to avoid making mistakes.

Economic Review blog explains this new phenomena [ko] in an in-depth post entitled “What is the reason behind direct oversees purchases? Is it merely over-consumption OR a customer riot?”

기사를 보면 현재의 현상인식은 “해외직구 나빠”정도인 것 같다. 해외직구는 경제가 세계화되고 기술이 발전함에 따라 자연적으로 증가할 현상이다. 기업은 세계화를 위하여 WTO와 FTA 등을 통해 각종 경제장벽을 제거하고 있다. 이에 대응하여 – 보다 더 수동적이긴 하지만 – 노동자들은 경계를 넘어 노동의 수요가 있는 곳으로 이주하고 있다. 그렇다면 소비자 역시 이러한 “합리적 경제행위” 주체가 되어야 한다. 생산업자와 수입업자가 같은 품질의 제품을 해외보다 비싼 가격에 팔고 있다면, 소비자는 그에 대응하여 해외직구로 비용을 절감하게 마련인 것이다[...] 공직자가 여성인턴을 성희롱하면 여성인턴을 뽑지 않는 것으로 사태를 해결하는 것처럼 내수를 살리기 위해 해외직구를 금지할 것인가? 국산 TV를 아마존에서 50% 이상 싸게 팔면서 국내 소비자를 “호갱님”으로 만들고 있는 상황에서 말이다.

When reading Korean news reports, many merely make statements such as “making oversees purchases is bad”. But these sort of oversees purchases will only increase, naturally, as globalization and technology progress. Companies are breaking economic barriers via WTO (World Trade Organization) and FTA (Free Trade Agreement), and laborers are too moving around for work, crossing borders, looking for places where there is a need for labor, although these are done much more passively. Customers, just like anyone else, should be allowed to make reasonable economic decisions for themselves. If the local producers and importers are selling the same product at a higher price in the local Korean market, [Korean] customers in response should be able to try to pay lowest price available by making oversees purchase. [...] Banning oversees sales in order to boost local sales is equivalent to “not hiring female interns in order to solve sexual harassment issues involving government officials”. It is especially true in the current situation of Korean brands selling their TVs at half price on Amazon, thus making Korean customers their doormats.

Angry comment flooded the Korean web in reaction to the news of the government’s desire to restrict Koreans’ economic activities. 

PPSS blog aggregated some of the best tweets [ko], and several of them are listed below. Most of them have been retweeted hundreds of times:  

As you can see from this [referring to the screen capture above which shows the exact same smart TV priced about four times higher in Korea], the Korean people have became companies’ doormats, but the government still claims that in order to boost sales at home, they will take measures to stem direct oversees purchases.

Those people use to say “you recent college graduates, this world is a highly competitive world, so unless you make yourself competent enough to win international competitions, we will not hire you.” Now they say “Please, dear customers. We can't win over international retailers. Will you reconsider making purchases from oversees sellers?” Seriously, can this be real?

Are you aware of the fact that the import of foreign snacks was not allowed? Chocolate Kisses used to be a rare item given to only few people as a gift from those who had traveled to the United States. Do you want to return to that time? Please drop it. If you don't want customers to use international retailers, then improve your quality or just stop pawning off low-quality brands as high-quality ones.

The government never tries to find the main reason from within the distribution network. I think the problem here is that the Korean people have finally found out what Korean retailers have been selling.

If your sales were affected by direct oversees purchases, then just lower the price. Or buy products at much lower prices and sell them for a little higher, but little lower price. If your business is affected to the point of “going out of business” just because of the direct purchases, then you’d better drop that whole business.

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  • Jake

    Korea is going back to the 1980′s with this non-sense. Furthermore, the Korean government should stop passing laws that negatively affect poor and working class people, while having little to no affect on the rich. Essentially, this new law would cause a rise in the cost of living for people in lower socioeconomic groups who are more sensitive to prices of commonly consumed goods and are more inclined to try to find the lowest price.

  • RElgin

    I’ve noticed that the limit for levying customs charges either become lower (used to be levied on mail order items starting at 300,000 Won) and now. The customs at Inchon are now more aggressive in looking for anything to charge a customs fee for. I believe this is because the government is trying to make up for their current budget shortfall. The government is likely going to need to bail out lots of bad loans thus the squeeze.

  • http://asiansecurityblog.wordpress.com/ Robert Kelly

    Both of these comments are exactly right, and it is a sign of just how dirigiste and mercantilist the ROKG really is. Consumers get stepped on in Korea, which is why there is a huge consumer debt crisis here.
    What happened to KORUS? What about all the FTAs Korea is supposed to embrace? ‘Free trade’ in Korea just means more chaebol exports. Not for the rest of us. Bleh.
    Stop protecting weak, over-priced Korean vendors. Let them compete for my business like anyone else.

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