After attending the Demandware 2015 Retail Connect show in Shanghai recently, I extended my Asia travel and visited Seoul, South Korea for the first time in my life. I have always been fascinated by this country, home of international brands like Kia, Hyundai, LG and, of course, Samsung. And thanks to Psy, we all know how to dance Gangnam Style

South Korea is also a serious and well-developed ecommerce market. In fact, Statista predicts that digital commerce sales will top $47 billion (US) by 2018, which would rank South Korea as the third-largest ecommerce market behind China and Japan. Add in the fact that Koreans are among the richest in the world, with Asia’s highest median income, and are top performers globally in education, healthcare and ease of doing business, and it’s easy to see why the country is a highly attractive opportunity for global brands.

A recent report by L2 Inc. showed that 75% of 67 global brands they studied were considering localizing their sites for Korean audiences, and that 65% are operating physical stores in South Korea. However, only 34% out of these 57 brands are running a transactional ecommerce site.

What could be causing the gap between a brand’s local store presence and a transactional site? Looking for answers I met with several local agencies, technology vendors and Demandware customers in Seoul. I learned that it’s difficult to gain trust and reach as a foreign brand in this fairly isolated country. Even mighty Apple struggled to compete in Samsung’s home market before finally succeeding with the iPhone 6, surpassing 30% market share. There are several hurdles global brands have to face when going into Korea. But given the demographics of the addressable market, they can expect rich rewards for their efforts.

User behavior and the entire digital landscape differ completely in South Korea from other our core markets. Here are four examples:

  1. Traffic acquisition: Google plays no role in South Korea, since the two local search engines Naver and Daum dominate the market. The concept of organic results barely exists. Instead, paid results and paid display ads dominate traffic generation. Ads are often paid and calculated in CPH (cost per hour), while CPO/CPC are uncommon.
  2. Korean consumers love loyalty programs! If you host an international site selling your products at list price, consumers will always prefer local wholesale where they can earn award points with every purchase, redeem cashback or further points based on the credit card corporation of this store and get even rewarded for social engagement like sharing or rating the product.
  3. Fraud is extremely rare in South Korea. This is the result of high security standards and strong regulations. Digital transactions require user authentication via third parties, e.g. telco providers, and online payment are highly regulated. International payment gateways will not work out of the box, and for consumers it is still a cumbersome process to pay with their credit card online.
  4. Naver, Kakao and other tech players have released several mobile payment services that bypass classical desktop payment hurdles. With that, mobile became the preferred channel and most convenient way for South Koreans to purchase products. In the twelve months from May 2014 to May 2015, mobile transaction value went up by 74%. This also shifts the focus of retailers to mobile first concepts, since nearly 45% of all ecommerce revenue is generated on mobile devices.

South Korea is not an easy market for global brands to enter. But its infrastructure, wealth and demand for high quality products present a very attractive opportunity for global brands. To boost your brand presence and revenue in this country, retailers need to focus on four things: The right strategy, commitment to the local culture, investment in market-specific customization and support of local teams.