A division of Soft Landing Korea Ltd.
Knowing the market ultimately comes down to knowing the consumer. Obviously the nature of your products and services will define your target consumers. As you may imagine, the Korean consumer embodies unique characteristics. Understanding and adjusting to these peculiarities can be essential to your overall success in the Korean market.
Taken together, Seoul, Busan and Daegu represent 67% of the nation's urban population. The greater Seoul metropolitan area includes the surrounding Gyonggi Province with its port of Inchon, and accounts for some twenty-three million people. In other words, almost half of Korea's total population lives with an hour's commute of Seoul. Numbers such as these indicate a process of rapid urbanization.
The nation is young; almost 19% are fourteen years old and younger. The median age - 33 years today - is expected to climb to 43 by 2030, but currently over 60% of the population is under 27, and displaying all the characteristics of young consumers. In terms of buying power, the Korean consumer has never been better off.
Disposable income continues to rise. With a per capita income topping approximately $14,200 in 2003, South Korea has a large middle and upper class. The wealthiest 10% in terms of annual household income or consumption ranking makes up 25% of the population while the poorest 10% in income ranking make up just 2.9% of all Koreans.
The "new rich," Korean middle class have also displayed a fascination with foreign brands and concepts. Since there is a concern about "keeping up with the Kims," Koreans are quick to replace items with the newest and most advanced. In other words, Korea is a nation of early adopters. Korea is also a nation of major consumer debt, as witnessed by its world-class credit card bills. Faced with a market place of ever-increasing variety, the Korean consumer has the means with which to make his choices.
As of 2000, more than 7% of the Korean population was 65 or over. By 2019, that figure is projected to rise to more than 14%. Japan is already there, with the 65-and-overs accounting for more than 17% of the population. Looking at what is working in Japan today may give insight into what may be successful in Korea tomorrow.
In 2002, according to the July 24, 2003 Far East Economic Review, more than 56% of senior citizen respondents to a government survey reported they were living apart from their children. The magazine went on to say that considering fewer than 12% lived on their own as of 1998, this is a major shift that is fueling new demand for goods and services for the more independent elderly.
Have you heard about Korea's cybermalls? They are not just for kids. There are also cyber-shopping malls that sell medical and other products on line for elderly Koreans. Best selling items include clothes and adult diapers specially designed for the elderly, telephones with big buttons, and games designed to help Alzheimer's patients.
Still there may not be as much silver in this Korean silver market as in other Asian or Western economies. Compared to their overseas peers, Korea's wealthy seniors are tighter with their spending, a reflection of their earlier lives of deprivation caused by the Korean War and the long struggle to rise out of poverty. Another factor is that South Korea lacks the social welfare system of more advanced countries, so older Koreans tend to be much more careful with their spending.
Nevertheless, the demographic shifts and the change in lifestyles to living apart from one's children have created major business opportunities that are expected to continue to grow for the next three decades.
More than ever, proper branding in the Korean marketplace is essential. According to the 2006 Edelman Trust Barometer survey, 84% of South Korea's more well off consumers consider trust in well recognized brands as part of their purchasing decision making -- with the manufacturer's financial stability also being a major concern.
Korean consumers are among the most trusting - or gullible - regarding what they read in newspapers. A full 49% of all Korean consumers trust what they read in the news media, most specifically newspapers' business reporting, according to the Edelman survey. In fact, the public tends to trust the media slightly more than businesses (46% trust), and much more than government (29%) or NGOs (39%).
This Internet-centric market, in which 70% of the population today have high-speed connections, puts more trust in information on the unregulated Internet (26%) than in what they view on television (22%). Many have noticed the power of the Internet in whipping up public opinion. Korea boasts the world's highest ratio (66%) of consumers reporting they have shared negative opinions about a company over the Internet – almost double the rate for American consumers. And a recent survey suggests as many as 40% of Koreans believe what they read on others' blogs.
Koreans are among the world's most computer and telecommunications literate consumers. While in 2004 there were more than 26.5 million landline telephones, there were also more than 36.5 million mobile cellular phones. In the same year, there were almost 40 million Internet users, representing 62% of Korean households (72% by 2006), and being served by more than 5.4 million Internet server sites.
Korea has 20,000 PC bangs, or Internet cafes, where the consumer can rent a super fast PC for US$1 an hour. Ninety-five percent of Koreans in their 20s and students use the Internet, and that jumps to 98% if one counts only students. Research found that about 76% of the male population (17 million) and more than 64% of the female population (14.5 million) use the Internet. A recent survey found that 70% of Korean Internet users depend on the Internet for information searches and more than 15% use the Internet for shopping information.
Korean consumers are arguably Asia's most enthusiastic. The South Koreans are not satisfied, however, with simply blogging. They have gone a step further than the rest of the world. From a base of an estimated 33 million Internet users, more than half of whom have their own web sites, the Koreans have come up with a new concept, SNS – or Social Networking Service.
The premier SNS provider is Cyworld, which pioneered the first form of this kind of service in 1999. Two years later, Cyworld begun offering next generation mini-home page services: "Mini Homepys." -- apparently a Korean transliteration of "Mini Home Page." Today, Cyworld is Korea's leading SNS, allowing Koreans to express themselves on line as individuals -- and as often as not, in creative, non-serious ways. (To view an English version of this new frontier of consumer marketing, go to http://us.cyworld.com/.)
The attraction of SNS is that consumers can create avatars (virtual but visible representations of themselves) and visit each other to share ideas and opinions. Hosts decorate their virtual spaces by purchasing decorations such as furniture, etc., with cybercash, called "Dotori" (acorns). And these are serious acorns. As of early 2006, Cyworld denizens were daily spending 250 million won (US$255,000) worth of Dotori, which would come to more than 91 billion (US$93 million) annually.
Marketers are discovering that Cyworld and other virtual markets are increasingly becoming as important for a number of products and services as the physical markets. One estimate has as many as 90% of all Korean teenagers and twenty-somethings registered with Cyworld alone -- and they are uploading over six million photos to that site every day. What once was a mall experience for American young people is now replicated in cyberspace for Korea's younger set.