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D-Place Report: NAVER Creates 39B in Annual Economic Value Through SME's Digital Transformation

- NAVER D-Place Report 2021 analyzes the economic impact of NAVER Smart Place platform

- The platform lessens the financial burden of 2 million offline businesses by managing information with a free Business Profile

- NAVER’s online platform and supporting tools enabled by advanced technologies can reduce barriers for offline businesses to enter the digital economy

 

2021-12-23

 

NAVER announced that NAVER Smart Place, its technology platform for offline small to medium-sized enterprises (SMEs) to create and manage their business profiles, is helping them enter the digital economy. NAVER Smart Place is a free platform where business owners can take advantage of various business solutions and improve their online presence on NAVER via NAVER Search and NAVER Map. As of December 2021, there are 2.08 million offline SMEs using NAVER Smart Place.

 

The D-Place Report 2021, which is based on studies led by Professor Yoo Byung-joon of Seoul National University’s Business School, was published for the first time on Dec. 23, 2021 with the aim of identifying the actual economic value that NAVER’s online platforms provide to offline SMEs through data analysis. It also serves to identify the role and future direction of the platform’s development as it empirically analyzes the role of digital transformation in offline business growth.

[Reference] Studies on NAVER Smart Place’s contribution to offline SMEs’ growth have been conducted since 2019, and findings are included as a part of the annual D-Commerce Reports in 2019 and 2020. However, due to the necessity of offline SMEs expanding digitally in 2021, NAVER announced the findings as a separate report to highlight the impact of the digital expansion.

 

[Photo] NAVER announces its first D-Place Report 2021

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NAVER D-Place Report 2021

Free online platform for offline SMEs’ digital expansion

Economic value evaluation of NAVER Smart Place

Led by Professor Yoo Byung-Joon of Seoul National University Business School

 

Professor Yoo’s team estimated the cost reductions and sales increases provided by various business tools on the platform, such as free business profile creation, booking and caller ID services, live chat service for customer support and display ads designed for offline SMEs. Place Ads, which appear on NAVER Search and Map when customers are searching for businesses, were excluded from the study as the service was only launched in June 2021. The study has shown that NAVER Smart Place contributes to a total of KRW 46.1 trillion (approx. 39 billion) in economic value annually, of which cost savings were about KRW 12.9 trillion (approx. USD 11 billion) and the sales boost effect amounted to KRW 33.2 trillion (approx. USD 28 billion).

 

[Photo] Economic ripple effect of NAVER Smart Place on offline SMEs

Contributes to creating KRW 46.1 trillion in economic value annually

(left) KRW 12.9 trillion in cost savings

(right) KRW 33.2 trillion in sales boost effect

 

[Smart Place helps to reduce advertising costs by KRW 12.9 annually]

Registered store information and reviews on the platform are exposed to potential customers through NAVER Search, Map and Smart Around (an AI-powered location recommendation service based on the user’s demographics). Through NAVER Smart Place, offline SMEs acquire an average of 202 clicks per week, and the advertising cost that is directly or indirectly saved is estimated to be KRW 12.6 trillion (approx. USD 11 billion) per year. Considering that the global average cost per click is estimated to be around KRW 712 (approx. USD 0.6), offline SMEs can secure about KRW 140,000 (approx. USD 118) worth of user clicks per week.

 

In addition, as the platform is free to use, offline SMEs can save the cost of building a website or using similar business tools. The total cost saved is estimated to be KRW 219.2 billion (approx. USD 185 million) per year. Display ads for local SMEs offer a cheaper cost per mile at KRW 500 (approx. USD 0.4), which allows SMEs to save about KRW 63,000 (approx. USD 53) per week compared to executing similar ads on other platforms. It is estimated that the total annual amount saved only through display ads for local SMEs is around KRW 72.5 billion (approx. USD 61 million).

 

[Contributes to the actual sales boost of SMEs, increasing annual sales by 7.9%]

The study also calculated the sales boost of NAVER Smart Place by multiplying the average return on ad expenditure (measured by Nielsen Catalina Solutions) based on the annual ad cost (KRW 12.6 trillion or USD 11 billion) saved by using the platform. It turns out that the platform is annually increasing overall sales by KRW 33.2 trillion (approx. USD 28 billion) and contributing to a net profit of about KRW 3.4 trillion (approx. USD 2.9 billion).

 

The annual sales boost by KRW 33.2 trillion is equivalent to providing an annual economic value of KRW 27.3 million (approx. USD 23,000) to each offline SME. Based on the average annual sales of Korean SMEs in 2019 calculated by Statistics Korea, the amount is equivalent to a 7.9% increase in sales and a 5.8% increase in net profit.

 

“While SMEs are going through many difficulties, such as raw material price spikes during the pandemic, NAVER Smart Place is contributing by providing more opportunities to reach customers and creating practical economic value for SMEs,” said Professor Yoo. “If offline SMEs actively utilize platforms like NAVER Smart Place to ramp up their digital expansion efforts, they can expect to see an improvement in performance.”

 

[NAVER Smart Place attracts more clicks, boosts interactions between SMEs and customers]

NAVER Smart Place’s impact on SMEs was also observed in previous D-Commerce Reports where NAVER announced comprehensive analyses on SME growth through NAVER’s technology and support programs.

 

In the D-Commerce Report 2019, customers were about 23 times more active in calling, navigating and saving locations when using NAVER Smart Around than general searches. NAVER Smart Around is an AI-powered recommendation service that identifies various places according to the location, time of the day and demographic factors (gender and age group) of consumers who are more likely to visit those places. Through the seamlessly connected services on NAVER, consumers can easily access a store’s Smart Place page that offers booking, navigation, caller ID services and customer reviews connected to the offline store.

 

Based on analysis of the usability of NAVER Smart Around by Professor Lee Kun-woong of Sungkyunkwan University, this AI technology presents new growth opportunities for stores in low traffic areas or those that are relatively unknown as it plays a role of reducing the importance of a store’s location and its number of reviews, which are usually considered essential for existing offline businesses.

 

The research shows that places recommended by Smart Around appealed more to customers than those found directly by keywords as search conversion rates (phone calls, navigation, and location saves) of Smart Around-recommended places are 23.2 times higher than those from keyword search. In addition, the difference in visibility (number of clicks) between popular stores and lesser-known stores is 14 times on keyword search, but is greatly reduced to 3.6 times on Smart Around. Furthermore, the conversion rate of shops in low traffic areas on Smart Around is 26.7 times higher than those found on keyword search, receiving 9 times more phone calls and 40 times more navigation usage.

 

Combined with NAVER Smart Place, NAVER’s technology platforms for offline SMEs are supporting digital transformation to expand their customer reach by overcoming disadvantages in location and popularity.

 

In addition, NAVER Smart Place was found to strengthen the engagement between offline SMEs and customers, which substantially improved business performance. According to the 2020 report, SMEs that actively manage information on the platform are up to 10 times more likely to reach customers. Smart Place has especially helped businesses increase the number of customer engagements (calls to visit by 2.4x, navigation by 3.1x, location sharing by 4.2x). In particular, location saving to visit later rose by 10.8 times, proving the platform is offering more opportunities to connect offline SMEs with consumers. The report also found that SMEs with lower awareness rates that are unfavorably located could overcome their disadvantages by utilizing Smart Place. Shop owners in non-business districts or less popular areas saw 2.51 times more enquiry calls, 3.1 times more searches on NAVER Map, and received 4.2 times more shares.

 

“NAVER Smart Place will continuously create economic value and provide high satisfaction for users, aiming to streamline operations for offline SMEs and provide joy in discovering various places among users,” said Kwon Hyuk-sang, leader of NAVER Smart Place. “We will strengthen synergies with NAVER’s various technologies, such as preference-based place recommendations, and create a beneficial cycle in which offline SMEs can connect with customers beyond their geographical barriers.”

 

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