Shinsegae Group recently unveiled a strategic partnership with Chinese tech giant Alibaba, valued at approximately 6 trillion won ($4.5 billion), aiming to rejuvenate its struggling e-commerce platform, Gmarket.
Despite its dominance in brick-and-mortar retail market, such as the popular Emart stores, Shinsegae has struggled to secure a significant share of the nation's booming e-commerce sector, where its smaller rival Coupang holds a commanding lead.
Announced on Dec. 26, the partnership involves a 50:50 joint venture, tentatively named Grand Opus Holdings, set to be launched within the first half of this year. While the details remain undisclosed, the collaboration is anticipated to leverage Alibaba's extensive global distribution network to expand Gmarket’s reach into foreign markets.
An industry insider noted potential challenges: “Gmarket may benefit from Alibaba’s infrastructure, but Korean consumers' skepticism about Alibaba products could pose risks for both Gmarket and Shinsegae.”
Uphill battle in e-commerce
Shinsegae's flagship unit, Emart, acquired an 80 percent stake in Gmarket in June 2021 in its largest-ever buyout deal, worth 3.44 trillion won. However, Gmarket has struggled with operating losses in recent years, despite posting profits of 4.3 billion won in 2021.
Gmarket reported operating losses of 65.4 billion won in 2022 and 32.1 billion won in 2023. For the first three quarters of 2024, cumulative losses reached 34.1 billion won.
The consumer response to the tie-up between the nation’s major retail players has also been lukewarm. According to the data platform Mobile Index, Gmarket’s combined monthly active users totaled 5.07 million last year, placing it last among the top five players. During the same period, market leader Coupang recorded 32 million users, while latecomer No. 3 AliExpress had 7.6 million users.
In a leadership reshuffle in June 2024, Shinsegae appointed Chung Hyung-kwon, a former Alibaba Korea executive and a close friend of Shinsegae Chairman Chung Yong-jin, as the new CEO of Gmarket. Chung previously held executive roles at Coupang as well.
Emart is expected to use capital from Gmarket to set up the Alibaba joint venture, reducing its stake to 40 percent. For the new entity, sources say Chung, the Gmarket CEO, is highly likely to assume the leadership role.
Mixed outlook for synergy
Gmarket and Alibaba aim to create business synergies in the nation’s highly competitive e-commerce market.
With a limited presence in global markets, Gmarket plans to leverage Alibaba’s extensive global network to export Korean products, capitalizing on the growing popularity of Korean culture. Alibaba’s AliExpress, which operates in nearly 180 countries, lowers entry barriers for Korean sellers by addressing language, marketing and regulatory challenges. Gmarket also anticipates diversifying its own product offerings by sourcing globally from Alibaba platforms.
The partnership is poised to reshape the nation's logistics landscape, intensifying competition in the ongoing quick delivery war sparked by Coupang’s same-day Rocket Delivery service.
In June 2024, Shinsegae partnered with CJ Logistics, the market leader handling around 80 percent of Korean parcel deliveries for AliExpress, in its renewed push for e-commerce leadership.
“The synergy between Gmarket and Alibaba could improve delivery speeds and cross-border shipping to compete with Coupang. However, integrating their operational systems seamlessly may take time,” another industry official said.
Ties to Trump
The partnership unfolds amid escalating political turmoil in Korea, as impeachment proceedings against President Yoon Suk Yeol continue. Adding intrigue to the development, the joint venture announcement came just days after the Shinsegae chief had a highly publicized meeting with US President-elect Donald Trump in Florida late last month.
“Chung’s primary objective, beyond exploring US business opportunities, seems to be assessing Washington’s stance on his new ventures involving China, particularly the collaboration with Alibaba,” said Baek Seo-in, a professor of Chinese studies at Hanyang University.
“Given the heightened risks in e-commerce due to ongoing tariff wars, being perceived as a ‘quasi-Chinese’ company could threaten opportunities. Chung appears to be shaping his China strategy based on sentiments and trends observed among high-ranking US officials.”
Chung has been invited to attend Trump’s inauguration on Jan. 20, showcasing his strong ties to Washington while advancing plans for the new Chinese venture.
