Online and Offline Retailers Square Off in Baby Formula Price War | Be Korea-savvy

Online and Offline Retailers Square Off in Baby Formula Price War


With price wars between large discount stores and social commerce sites heating up, baby formula is in the limelight. (Image : Yonhap)

With price wars between large discount stores and social commerce sites heating up, baby formula is in the limelight. (Image : Yonhap)

SEOUL, Feb.28 (Korea Bizwire)With price wars between large discount stores and social commerce sites heating up, baby formula is in the limelight.

As formula is being purchased more frequently through online sites, the share of offline sales is rapidly falling.

This is the main reason why large discount stores such as Emart and Lotte Mart are putting formula on the front lines in their competition to lower prices.

Formula is a product that was sold at cheaper prices on social commerce sites as part of their pricing strategies. As a result, the proportion of online sales of formula is on a rapid rise, reaching almost 50 percent of total sales.

Some industry watchers even suggest that the online formula market has already exceeded the offline market.

According to Namyang Dairy Products, which has the largest share of the formula market, domestic sales of formula reached 17 billion won last year – 10 billion won from offline sales, and seven billion through online sales.

In 2013, offline sales came in at 16 billion won, compared to only four billion won for online sales.

Industry watchers explain that consumers in the target market for formula also influence the sales of other products. “Women in their 30s are the main purchasers of formula. If they migrate to using social commerce instead of actually going to offline stores to buy formula, they would buy other products through social commerce as well. That’s why large discount stores are starting a price war by lowering the costs of formula and diapers.”

Through the burgeoning price war, large discount stores are seeking to strengthen their online stores based on the success of their offline stores.

Emart officials hope they can kill two birds with one stone. “By providing the lowest formula prices, we will regain a competitive edge for our offline stores. At the same time, we hope to elevate the reputation of our online site, Emart Mall.”

The sales of formula that occurred at offline Emart stores dropped 27.9 percent last year, while Emart Mall saw 12.1 percent growth.

At the same time, social commerce site Coupang saw a rapid 305 percent increase in its formula sales in 2015.

By M.H.Lee (mhlee@koreabizwire.com)

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