There are many choices for doing business in South Korea. For most companies just coming into the market, securing local representation is the best way to sell to consumers Aside from being a good business practice, firms bidding on government procurement projects must be registered with the South Korean Government and have a base in South Korea.
There are several preferred modes of market entry. The first is to appoint a registered commissioned agent (known as an "offer agent") on an exclusive or non-exclusive basis. Another option is to name a registered trading company as an agent. If the foreign company prefers to have more control, although with additional expense, it can establish a branch sales office managed by home office personnel and South Korean staff. Joint ventures and licensing agreements are also potential market entry strategies but it is recommended that companies considering such arrangements be certain that their product has a good market in South Korea and have sufficient resources to sustain such operations. Conducting a due diligence review on any partner is essential, as is taking the appropriate steps to protect intellectual property. View our IPR Toolkit site for more information on how you can protect your intellectual property.
Distribution systems are very advanced in South Korea and retails outlets are plentiful. In addition to large local retail stores and small family-run businesses, foreign retailing giants such as Wal-Mart and Price Costco have successfully entered the South Korean market. Direct selling and multi-level marketing are also permitted in this market. Price will be the primary consideration when selling into the market since U.S. cost structures may be higher than those in South Korea. On average, South Korean agents require a 10 percent commission with lower commissions (5 - 7 percent) for general machinery and higher margins (15 – 18 percent) for high technology items such as medical equipment. Consumer product mark-ups range from 50 to 100 percent. Companies should also consider adapting their products to South Korean tastes.
