Naver: online chaebol?

Naver, Korea’s near omnipresent portal accounting for over 70 percent of online searches, has announced plans to launch an open market service. The industry however, is comparing Naver to an online chaebol amid hostile social sentiment for conglomerates that are recklessly expanding.

NHN, which operates Naver, announced that it would launch Shop N, an open market service linking sellers and consumers, around the end of March. A merchant can open an online shop and register the information about goods being sold. The merchandise will be sold on this commercial platform through Naver, which will guarantee diverse exposure as well as provide a search service to link the consumer with the seller.

NHN explained that Shop N is different. “While conventional open markets are like retail outlets displaying diverse goods, we will be like an online department store as a platform for brand shops. While conventional sites are focused on products, Shop N focuses on shops,” a spokesman for Naver said.

When one buys a laptop through open markets like Gmarket or 11st, the buyer doesn’t care who the seller is. Only the price and Gmarket or 11st matter in that case. With Shop N, the image or reputation of the seller matters.

He said Naver is providing the vendors with a shopping mall solution so that they can easily set up their own online shop. “They can sell more within the Naver platform.  It is win-win for sellers and users as well as Naver,” he said. The spokesman added that the portal’s advancement into the sector is aimed at providing better search results. “When someone searches for ‘blue jeans’ on Naver, he is not looking for the definition. He wants to make a purchase.”

Naver will profit in two ways. Those opening a shop with Naver are obliged to use its payment system, for which Naver will receive commission. The sellers can also choose to include their shop on Naver’s Knowledge Shopping, a shopping information provider. When the transaction is made through Knowledge Shopping, the seller will have to pay a sales commission to Naver, just like they do with open market operators like Gmarket. They can also run advertisements on the portal site, but it is completely their choice, according to Naver.

The open market industry, however, is not standing idly by. “With such huge traffic, Naver is like the shop with the best location. Just like offline, location matters the most on the Internet,” an industry analyst said.

He said small online shopping malls dedicated to specialized items will suffer the most negative impact. “As Naver dominates with huge traffic, they won’t be able to survive on their own. They will have no other choice but to utilize the Naver shopping platform.”

He criticized Naver for acting like a conglomerate by entering every business and hurting small merchants. He said it goes against the social consensus which is trying to save traditional markets while competing with massive retail outlets.

Naver, however, stresses that it is a small player in the open market industry. “Gmarket is operated by eBay, and 11st is under SK Telecom. We are a small player in the market,” the Naver spokesman said.

Some say that Naver’s open market service will only benefit big merchants who can afford the marketing costs on the site. An industry analyst said that Naver is likely to give them special favors, such as listing their shops at the top of search results.

Naver said it would treat all sellers equally. “There is no special consideration for anyone. The algorithm will determine which will come on the top of the search result,” the Naver spokesman said.

The market is skeptical, citing the fall in websites providing real estate information a few years ago. Some of them closed down as Naver started providing real estate data. “At first, real estate agencies registered with other sites were treated equally, but Naver’s agencies started to come first in search results. Those running advertisements on Naver would come on the top of the search list in the end,” a spokesman for an open market said.

He said that it was only matter of when Naver will start its open market service. “Portals are concerned about profitability stagnating. Commerce has become a new source of income, though it goes against their identity as a portal.” <Korea Times/Yoon Ja-young>

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