The Korean Distribution System

Abstract

As South Korea (hereafter, Korea) emerges as one of the largest markets for U.S.- and European-made goods, a growing number of U.S. and European firms have expressed keen interest in penetrating the lucrative Korean market. Despite the enthusiasm of U.S. and European firms, they are faced with an array of invisible market barriers that makes it difficult for them to sell their products in Korea. The Korean distribution system is often symbolic of such barriers. In general, the Korean distribution system is characterized as closed and multifarious with the co-existence of manufacturer-controlled distributors and an excessively large number of small-scale “mom-and-pop” retail stores. Due to its unique structure, the Korean distribution system has been generally misunderstood by many Westerners and subsequently this misunderstanding has created an unnecessary strain on trade relations with Korea. In this paper, we provide an overview of the Korean distribution system and then formulate proactive distribution/marketing strategies for the successful penetration of the Korean market.

Key Words:

• Korean distribution channel
• market entry
• trade barriers