Trip.com, the largest online travel agency (OTA) in Asia based in China, has sold more airline tickets than domestic travel agencies in Korea, leveraging its low airfare prices. Temu, a Chinese e-commerce company, has announced its entry into the open market in Korea, challenging Coupang, the dominant player in the domestic retail market. Temu plans to directly adjust sales prices as part of its strategy. Chinese companies, backed by enormous capital, are aggressively trying to increase their market share in the Korean travel and retail markets.
Can Trip.com rise to the top 3 in air ticket sales by the end of this year?
In December last year, Trip.com jumped to fourth place in the airline ticket issuance market based on the Billing and Settlement Plan (BSP). Trip.com sold a large number of year-end airline tickets, following HanaTour, InterparkTriple, and MyRealTrip. In January of this year, it dropped one place to fifth, but still ranked higher than other travel agencies such as Modetour and Very Good Tour. BSP is an International Air Transport Association settlement program that is used as an indicator to gauge the sales performance of travel agencies' airline tickets. Although some LCCs are not included in the settlement, most airline tickets are aggregated.
The industry predicts that Trip.com could rise to third place in air ticket sales by the end of this year. It is possible that the situation of threatening HanaTour, the existing comprehensive travel agency powerhouse, and Yanolja Universe (a merged corporation of Yanolja Platform and InterparkTriple), the representative domestic OTA, may become a reality.
Trip.com is rapidly expanding its market share by offering low prices. In November last year, it sold round-trip airline tickets for Seoul-Osaka and Seoul-Bangkok for 88,000 won on a first-come, first-served basis through a mega promotion.
Temu intervenes in sales prices
This is also the case in the e-commerce market. Temu, a Chinese e-commerce company, has recently started recruiting sellers to directly enter the Korean market, and has established operating guidelines to allow the platform to directly adjust sales prices. In this method, when a seller sets a price considering the margin, Temu adjusts the price according to changes in market demand. This is in contrast to domestic e-commerce companies operating as open markets such as Naver, where the platform does not intervene in sales prices. If a seller does not agree to Temu's price adjustment, it is virtually impossible to enter Temu and sell. Temu said, "Temu's pricing is determined through consultation with the seller, and the seller has the final say on whether to register the product." It is interpreted as a measure for Temu, which has secured domestic users through ultra-low-priced overseas direct purchases, to maintain ultra-low prices in the open market and increase users. In order to secure customers in the domestic e-commerce market against Coupang, securing domestic sellers and price competitiveness are considered essential.
According to Mobile Index of IGA Works, the monthly active users (MAU) of e-commerce in January of this year was 33.02 million for Coupang, which is more than three times larger than Ali (9.12 million) and Temu (8.23 million). In particular, AliExpress jumped by about 62% compared to January of last year, and Temu by about 79%. Coupang's growth rate was relatively low at 9.9% compared to AliExpress and Temu.
In addition, attention is focused on what benefits Temu will give to sellers instead of adjusting sales prices. AliExpress, which entered the Korean market earlier, did not charge entry fees to sellers who entered the 'K-Venue', a Korean product specialty store, in the early days.
The industry is very nervous about the moves of Chinese companies. It is also difficult for domestic companies with insufficient capital to compete with them in price. An industry official said, "Chinese companies are conducting marketing and promotions with the idea of securing market share even if they suffer losses, rather than thinking about making profits right away." "If Chinese companies have quality and convenience beyond price, the impact on the market will be significant."
[Copyright (c) Global Economic Times. All Rights Reserved.]
