D-Commerce Report: NAVER Smart Stores Spur SMEs’ Digital Transformation
D-Commerce Report: NAVER Smart Stores Spur SMEs’ Digital Transformation
- D-Commerce Report shows the economic impact of NAVER’s e-commerce platform
- 62.2% of NAVER Smart Store sellers offset the decline of offline sales in 2021
- Study shows the importance of digital transformation for offline SMEs, and underlines the efficacy of NAVER’s various support programs under ‘Project Flower’
NAVER Corporation’s (KRX:035420) recently released D-Commerce Report 2021 proves that its Smart Store e-commerce marketplace has generated significant value by aiding the digital expansion and growth of small to medium-sized enterprises (SMEs) during the pandemic.
The annual report, which is in its fourth edition, began with the idea that it was important to analyze the e-commerce ecosystem from the SME’s perspective, as the data generated by the growing e-commerce market nourishes business performance. Since 2018, NAVER has collaborated with Korea’s leading universities to analyze the growth of businesses established on its online platforms.
Accelerating the digital transformation of offline SMEs through Smart Stores
NAVER is leading the digital expansion of offline SMEs in various areas on its shopping platform. There are over 470,000 Smart Store sellers on the NAVER marketplace, and its local market shopping service is used by 146 traditional markets. NAVER Shopping Window, an online-to-offline (O2O) commerce platform, is servicing over 30,000 offline stores.
In the 2021 report, the research team led by Associate Professor Choi Bo-reum from the Business Administration faculty at the University of Seoul looked at how offline SMEs achieved success with digital transformation through the Smart Store platform. According to a survey of Smart Store sellers operating offline stores, 75.5% of respondents experienced sales growth after running their businesses both online and offline, with 16% seeing their sales surge by more than 50%. Offline sales in the first half of 2020 — as widespread outbreaks took a heavy toll on activity — fell by an average of 5%, while online sales growth exceeded an average of 15% during the same period, offsetting offline declines.
The competitiveness of SMEs has also been enhanced due to digital transformation accelerated by using NAVER’s D-Commerce Program, a data-based online SME education and support service. It was observed that the support program had created a significant impact, with the annual transaction amount of SMEs increasing by 60% YoY, and the revenue of sellers with annual sales of less than KRW 300 million (approx. USD 250,000) increasing by 90% YoY as of the first half of 2020.
NAVER technologies help grow online businesses, expand customer touch points
SMEs find it challenging to invest in technology as it incurs longer-term investment and manpower input. Lessening their burden, NAVER is providing various services to SMEs so that they can compete on more equal ground with larger companies for faster growth. For example, according to the 2021 report, NAVER Shopping Live’s contribution to business growth was most noticeable among smaller SMEs.
NAVER Shopping Live is livestreaming e-commerce platform where sellers and consumers can interact in real time. Shopping Live has firmly established its reputation as a new marketing and sales solution for SMEs, recording 700 million views and generating KRW 500 billion in accumulated transactions within 16 months of its official launch. Smart Store sellers who leveraged Shopping Live showed an average sales volume increase of 49% and raked in 48% more sales compared to those who did not.
The report also says that Shopping Live’s contribution to business growth was even greater among smaller-sized businesses. The sales growth rate of SMEs was 1,575%, three times higher than that of large enterprises who only saw a 531% growth rate. Store saves and update alert subscriptions (up 3,292%), and store visits (up 1,341%) were also about 2.6-2.8 times higher among SMEs than large enterprises.
“NAVER Shopping Live is an e-commerce solution for boosting sales and marketing. It significantly lowers barriers for SMEs to leverage live commerce to overcome social distancing restrictions, providing opportunities for business growth,” said Associate Professor Kim Ji-young from the Global Business Administration department at Sungkyunkwan University. “In the increasingly fierce e-commerce market, SMEs can maximize their opportunities by leveraging NAVER’s cutting edge technologies.”
NAVER’s AI technology is also helping to boost the business performance of SMEs. Researchers from Korea University’s business school who participated in the 2020 report found that NAVER’s AI-based product recommendation technology, AiTEMS, makes products more visible to shoppers. The study indicated that consumers were 6.2 times more likely to select products with lower visibility and fewer reviews through AiTEMS as AI technology helps match products to consumers according to their individual preferences.
It also found that AiTEMS helps reduce marketing costs for SMEs by mirroring changing market demands in search results. This could also help SMEs that do not have state-of-the-art capabilities or data analysis technologies reduce manpower needs for their online businesses.
Professor Lee Kun-woong said, “We observed that NAVER’s AI recommendation technology has become a core tool to connect SMEs with consumers and provide new growth opportunities. AiTEMS helps create greater exposure for lesser-known products and stores alongside more popular options, leveling the playing field and creating socioeconomic equity for all through AI.”
NAVER technologies help increase the digital literacy of SMEs for business growth
The D-Commerce Report emphasizes that SMEs should adapt quickly to rapidly changing business environments amid accelerating digital transformation, including contactless technology and services due to the pandemic.
NAVER is supporting SMEs with various technologies and platforms, such as Biz Advisor for data-based analysis and insights for business. As it offers real-time information about business performance and consumer behaviors, sellers can make optimal business decisions according to rapidly changing trends. As of December 2020, NAVER Smart Store sellers who actively used Biz Advisor saw an 89% increase in daily visits to their stores YoY, and a 151% increase in total visits to stores YoY.
According to the 2020 report, sales of Smart Store sellers using Biz Advisor increased from at least 34% up to 54%. Analysis by category showed that sales increased by 34% for agricultural products, 54% for household appliances, and 43% for women's clothing when utilizing Biz Advisor. Based on the usage rate and sales growth effect of Biz Advisor, the entire domestic online shopping market is expected to generate additional profits of KRW 1.4 trillion per year.
Project Flower enabling SMEs to scale up with NAVER’s technology and big data.
Professor Choi found that NAVER’s technological platforms and SME support program centered under the corporation’s Project Flower initiative are useful in increasing sellers’ sales and expanding business.
Among these is the customized one-on-one business consultation, which reviews the progress of the seller’s Smart Store in detail or helps analyze customer data to enhance business performance. For example, sellers in Living and Health categories who sought consultation recorded an average sales growth rate of 278% the following year while those who did not saw a 15% decrease in sales.
The rapid growth of SMEs with digital competitiveness based on NAVER’s data-based D-Commerce support program was also noted in the 2020 report. In a survey of about 400,000 Smart Store sellers with transaction histories between January 2016 to March 2020, SMEs that received commission fee waivers through NAVER’s ‘Start Zero Free’ program grew their sales volume by 165 times compared to before the waiver was introduced. Moreover, SMEs who received ‘Growth Point’ support—a marketing incentive for sellers—showed a 72-fold increase in sales growth. Moreover, NAVER’s ‘Quick Escrow Program’ helps promote stable capital turnover for SMEs.
NAVER e-commerce creates wealth distribution and new jobs by helping SMEs
Wealth distribution across the country has improved as more SMEs undergo digital transformation through NAVER. According to the 2019 D-Commerce Report that estimated the regional sales volume generated through the NAVER platform, the digital transformation of SMEs created a capital inflow of KRW 21 trillion per year in non-metropolitan areas. In 2020, the annual sales growth rate of Smart Store sellers in rural areas increased by more than 100%.
This can be attributed to NAVER’s Smart Store platform which has helped sellers expand their customer reach through e-commerce and create better product visibility. SMEs who started their businesses in the digital space through NAVER were also likely to adopt additional e-commerce platforms to further grow their businesses. As a result, more than 70% of SMEs scaled up their businesses by utilizing an average of 3.5 platforms within two years of business establishment.
As SMEs grew in size, new jobs were also created as the demand for manpower grew. From 2019 to 2021, SMEs that operated online and offline channels simultaneously recorded annual employment growth rates of 4%, 6% and 8%, respectively, exceeding the overall industrial employment growth rate. These numbers prove the value of digital expansion for SMEs in generating employment opportunities.
Overall, the findings from the annual D-Commerce Reports were a strong testament that NAVER’s strategic support of SMEs with its technology platform and data-driven marketing tools has contributed to the acceleration of their digital transformation and business growth. This means that NAVER is maximizing its SME support and funding by designing practical and meaningful programs based on its technology and data.
“Digital expansion has emerged as the most pressing issue for businesses today, and it has proven to be an essential growth factor in Korea which has a high proportion of self-employed entrepreneurs,” said Professor Choi. “If more businesses utilized NAVER’s services and support programs that help nurture innovative growth, offline SMEs can achieve stable digital business expansion and growth in the future.”
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