Ugly truth of social commerce in Korea (Using Porter's 5 force model)

This may sounds pretty much offending to those of you who have firm belief that social commerce is one of the best channels that we had so far... but this is the ugly truth that is happening in Korea, known as leading country in IT industry.

Few years ago, some of the HBS graduates copied the Groupon service model and established a company called Coupang (http://coupang.com/). As you can imagine, they were a huge success. Soon afterwards, once they found out that this was a awesome Biz model, so many other companies (including original Groupon) launched the business in Korea. As a consequence, competition became fierce. Yup.. 'the barriers to entry' of this Biz model was way too low..

Korea is not a hugh country... and this means that resources of social commerce (good restaurant, Spa, products or whatever) are confined. In the early stage, it was fairly easy for social commerce companies to contact these resources and get a good deal out from them. However, nowadays, a typical nice restaurant in Seoul is receiving at least 10 offers from various social commerce companies each week.. Yes, 'Bargaining power of customers' are now so big.

What happened was, social commerce companies began to rely more and more an advertising. After all, 'price cut' and 'awareness' was their only weapons to deal with the fierce competition, and both had a extremely negative effect on profit. Non of the social commerce companies in Korea is making money nowadays. 'The competitive rivalry within an industry' is also huge.

What happened afterwards is so obvious.. Recently, social commerce companies are being blamed in Korea for their poor quality management. The meet that was delivered was rotten, the restaurant that was reserved offered awful foods, and nail care service that they reserved asked customers to pay more.. As a result, now Korean Government is starting to pose a heavy and strict regulation on these social commerce companies. 'The government regulation' is also increasing.

This is what is happening in Korea. I really hope that this is the phenomenon that is going to last temporarily... But things are much more complicated than I can write in here..