Amazon has announced a strategic partnership with SK Telecom's e-commerce subsidiary 11 Street, marking the tech giant's entry into South Korea's thriving e-commerce market.
According to Asia Business Daily, SK Group is in talks with Amazon to invest between KRW 50 billion (US$45 million) and KRW 300 billion (US$270 million) in 11 Street's convertible preferred stock.
South Korea is the sixth largest eCommerce market in the world, with a total value of US$61 billion in 2019.
The country had the highest eCommerce penetration rate of 24.1% in 2018.
In addition, the COVID-19 pandemic and the shift toward contactless transactions have further accelerated the industry's growth.
The South Korean eCommerce landscape is highly competitive, with significant players like Coupang, Naver, and eBay Korea dominating the market.
However, 11 Street's focus on cross-border eCommerce business sets it apart. In 2019, South Koreans spent KRW 3,636 billion (USD 3.27 billion) on foreign eCommerce websites, an increase of 22.4% compared to 2018.
Meanwhile, foreigners outside of South Korea spent KRW 5,999 billion (USD 5.4 billion) on South Korean eCommerce websites in 2019, an increase of 65.4% compared to the previous year.
11 Street has been actively pursuing cross-border eCommerce opportunities, signing a cooperation agreement with the Korea Center in December 2018.
Korea Center operates Malltail, a fulfillment and eCommerce platform for cross-border purchases. 11 Street invested KRW 27 billion (USD 24 million) in Korea Center, representing 43% of its equity.
The collaboration between Amazon and 11 Street is expected to benefit both companies. 11 Street can expand its market share by partnering with Amazon.
At the same time, Amazon can improve its sourcing capabilities by working with 11 Street's sourcing team.
11 Street has already helped small and medium-sized businesses ship and sell their products on e-commerce platforms such as Lazada, Shopee, and Qoo10.
The COVID-19 pandemic has reportedly slowed talks between Amazon and SK Group.
Still, the exact amount of Amazon's investment and the roadmap for the collaboration are expected to be revealed in the first half of 2021.