ince last month, the company has increased its marketing initiatives, including appointing South Korean actress Kim Yoo-Jung as the ambassador for Shein sub-brand Dazy and opening its first pop-up store in the famous shopping street Seongsu-dong this week to increase its brand recognition in the market.  “South Korea’s fashion market is still experiencing enormous growth, which I think was the main motivator [for Shein’s expansion],” Dominika Kustosz-Lee, founder and CEO of Dkl & Company, told Inside Retail.  “The market is already very saturated with well-established players, but the price range on Korean platforms is typically substantially higher than what Shein offers and that’s their main differentiator.” Well-established presence of local rivals  Launched in South Korea last August, Temu reported an eleven-fold increase in the number of users, reaching 6.36 million monthly active users as of March and more than 8 million by April. The number also positioned the company as the fourth-largest in the domestic market after Coupang, 11Street and AliExpress, according to Business Korea.  Entering the market in 2018, AliExpress’ number of users in South Korea increased to 9 million as of April.  “It’s impossible to ignore Shein’s entry, and fashion marketplaces which also make money from hosting third-party sellers will probably be affected first,” Kustosz-Lee said.  The market is under the domination of local fashion platforms, including Musinsa, Ably, Brandi, W Concept, Zigzag and 29CM. Beyond the online platform, Musinsa also operates offline stores and provides content, including webtoons, to support its eco-system.  South Korean online platform Ably posted its first operating profit of 3.3 billion won last year from a loss of 74.4 billion won the year before, with sales surging 44 per cent to 259.5 billion won. To fuel its expansion plan, the company is set to raise 200 billion won (US$144 million) from investors, including Alibaba Group. Concurrently, its rival 11Street Co reportedly is set to be acquired by South Korean grocery delivery platform Oasis Corp as competition intensifies.   While Shein has quickly gained traction in the US, reaching a US$100 billion valuation in 2022, five years after launching there, it’s a different story in Asian markets, such as Japan and South Korea, where fashion consumers have a deep-rooted loyalty to local brands, and the fashion industry is highly competitive with well-established domestic players. The company may need a different strategy to gain market share and establish a foothold in these regions. According to data.ai analysis shared with CNBC, in Japan, Temu was the first to reach 4 million downloads in Japan, faster than Shein, local platform Mercari and Amazon. The same pattern appears to be playing out in South Korea.  “Localization of services and shipping speed will probably be the most challenging aspects,” Kustosz-Lee said about Shein’s prospects in the South Korean market. “This is a country of same-day or one-day delivery – Coupang sets new standards for everyone. Anything beyond that is considered to be a long waiting time.” “It’s important to note that there is no Amazon Korea, Ebay Korea also never really existed ­– the company ended up acquiring existing platforms before recently exiting the market altogether. In general, very few non-Korean e-commerce companies were able to succeed here – Qoo10, which also acquired some local players, being one of the exceptions. Koreans like services designed by Koreans for Koreans,” she added.  Quality control and market regulations  While South Korean consumers enjoy the extremely low prices offered by Shein, Temu and AliExpress, complaints to the Korea Consumer Agency related to those companies are rapidly increasing, varying from delivery issues, and counterfeit goods, to the presence of toxic substances.  In May, the Seoul city government reported that toxic substances up to 428 times the permitted levels were found in children’s products sold by Shein. The city also conducted safety tests on products from Chinese e-commerce giants like AliExpress and Temu on seven occasions. Out of the 93 products tested so far, approximately 40 products, or 43 per cent of the total, were found to contain toxic substances. The rise of complaints raises questions about the regulation and oversight of international e-commerce platforms and the importance of ensuring consumer safety and product authenticity. “The platform may face more scrutiny through new laws, especially because of how sensitive issues related to children’s safety are,” Kustosz-Lee said.  “With the country’s low fertility rate-related crisis and the fact that having a child has become a luxury, such cases become high-profile very quickly. The government intends to establish a systematic quality and safety inspection system for products purchased via overseas e-commerce platforms and continue expanding covered categories. On 24 May 2024, a business agreement was signed with three safety certification agencies of the National Institute of Standards and Technology. For now, it seems to be issuing a communication to overseas and local platforms selling such items and blocking access to pages of items identified as harmful.” Room for improvement According to The Federation of Korean Industries, South Korea ranks as the world’s 5th largest e-commerce market after China, the US, the UK and Japan, with 228.9 trillion won spent online last year.  “Aliexpress, Temu, and now Shein will probably continue to establish a pretty strong presence in the market,” said Kustosz-Lee. “From what I know, the reason why Aliexpress and Temu became so widely used over the past few years is that people tend to buy things in bulk on these platforms to then resell and make some extra money. It’s about the price and that’s about it.”  She also added inflation and the general downward trend of the global economy have had a very negative effect on the livelihood of Korean people. It’s a small country so naturally dependent on what is happening in partner markets.  “In the long term, I think that the key to solidifying one’s position or disrupting the scene will be providing both an exciting curation of fashion and lifestyle pieces while truly putting customer experience at the forefront of business strategies,” Kustosz-Lee concluded.