By Don Southerton, KoreaLegal.org Editor,
Localization and understanding the market is key in overseas’ expansion. My work centers on assisting with both Korean brands entering the US market and visa versa. This recent feature in Yonhap and Korea Times shares my views along with others involved in Korea business. I note that trends in Korean consumerism are changing. For example,”Korea’s white collar consumers demand quality, innovation and design appeal. In addition, I see the trend toward ‘green’ and well-being an aspect.”
(Yonhap Feature) For brands, becoming Korean is key for success
By Jeff Liebsch
SEOUL, Feb. 22 (Yonhap) — On a typical morning, 17-year-old Do Sang-hoon gets ready for school. He eats a bowl of cereal for breakfast, puts on his North Face jacket, turns on his iPod Nano and heads out the door. On the weekend, he heads to McDonald’s for lunch with his friends and Indian food for dinner with his family.
Scenes like this are common in many Western countries, but this trend is becoming more common in South Korea. Students like Do who crave foreign products are Koreans who are maturing into consumers bucking the trend of buying local, and splurging on products and services from overseas.
“Students think foreign products are cooler than Korean products. All my friends like Western food, Hollywood movies and products like iPhones,” he said. “Everybody follows trends…If someone uses it, I want to use it.”
Over half of the Global Fortune 500 firms have already established a presence in the country, and with luxury goods and status symbols becoming must haves, it’s no wonder that international brands are eager to tap into Asia’s fourth-largest economy to get a piece of the pie. The key to their success, however, lies much in how well they can adopt Koreanness.
“International companies, like Wal-mart, have failed in the Korean market as they attempted to apply the same strategy and layout as they did in the majority of their previous expansion setups and thus did not account for the variance in culture that they encountered in South Korea,” said Adam Cave, a professor of management at Kyungsung University.
“Alternatively, companies like McDonald’s, Kentucky Fried Chicken and other large well-known franchises have achieved success with their brands through identification of cultural components and adapting their products to suit the needs of their customers,” he said.
McDonald’s launched a delivery service, catering to office workers who often have to eat in and mothers who need quick afternoon snacks for their kids and friends.
Coffee shop giant Starbucks approached its Korean consumers with a show of their understanding of local culture. In traditional Insa-dong in downtown Seoul, when Koreans showed opposition to the Seattle-based company’s expansion plan into the historic area boasting museums, antique stores and vintage shops, instead of using their power and influence, they changed the lettering of the store into the Korean alphabet Hangul, and redecorated the store in traditional Korean style. The Starbucks location near City Hall in Seoul also showcases traditional Korean culture, with much of its interior constructed with material reclaimed from old buildings.
Retail giants Wal-Mart and Carrefour, on the other hand, both floundered in the local markets and sold off their businesses in 2006. Analysts argue that they had not “localized enough” and failed to understand the uniqueness of Korean consumers.
Korea is fairly new to foreign brands. Its expanding market started to get noticed in the 1980′s, but it wasn’t until restrictions on overseas travel by South Korean citizens were lifted in 1989 that the country and the people opened up to the new world of overseas products.
Yet, international brands often pick Korea as their test market.
Don Southerton, of Denver-based Bridging Culture Worldwide, specializes in helping foreign companies invest in Korea. He worked with firms such as KIA and Hyundai bridging their cultural gaps as they entered the U.S. market, while also helping companies such as Eddie Bauer, Natori and Smashburger who are looking to enter the Korean market.
From his point of view, Korea is a great place for companies looking to expand into Asia as a test market, as Koreans tend to be trend setters around Asia, thanks to the Korean Wave, or Hallyu, which has swept across most of Asia.
“I’m not sure it’s actually that the Korean consumer is ‘different,’ but especially with technology, Koreans are early adopters,” he said. “The key factor in launching products in Korea is that it’s a highly connected and responsive, homogenous, well-educated population living in concentrated metropolitan areas, which in turn makes it easy to target a specific and defined group of consumers. I’d say it was the perfect consumer test market.”
Sometimes, successful foreign brands change the local culture.
“Just ten years ago, there was no place for women to really hang out after a meal,” says Lee Su-jin, a 29-year-old kindergarten teacher. “Now, with coffee shops, or brunch restaurants, there are many options that were never here without the influence of the foreign companies and TV shows.”
Now, local coffee shops like Caffe Bene and Angel-in-Us fill every street corner.
Southerton notes that trends in Korean consumerism are changing.
“Korea’s white collar consumers demand quality, innovation and design appeal. In addition, I see the trend toward ‘green’ and well-being an aspect.”
Amy Jackson, the president of the American Chamber of Commerce in Seoul, feels that companies who wish to succeed in the Korean market should form mutually beneficial relationships and trust with local partners.
“For U.S. companies interested in entering the market, we advise them to take time to learn about the local population, and be sure to take advantage of all the resources that are available to help them succeed in the Korean market,” she said.