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Discovering the Korean Consumer (Part I)
By Tom Coyner
Korea Times
August 2, 2006
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.
A Young
but Maturing Population
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.
Graying
of Korea
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.
The
so-called "silver industry" catering to these older South Koreans
was estimated to be worth about 27 trillion won in 2005, compared with 17
trillion won in 2000.
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.
Who Do
You Trust?
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.
Make Mine
Digital -- at Internet Speed
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.
Meet You
at Cybermall!
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.
But not all
consumers are purchasers, so next week we will address the critical
question, "Who wields the won?"
Tom Coyner is a long-term resident in Korea and runs
consulting firm, Soft Landing Korea. Coyner can be reached on www.softlandingkorea.com.
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