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The Light and Dark Sides of the Social Network Service Market

At the end of April, negative attention was brought to the famous influencer and internet shopping mall CEO, Imvely, as her customers found mold in the pumpkin porridge she sold. Moreover, it was found that the products she promoted as being “safe for children and pregnant women” actually contained unsafe materials such as microplastics. Likewise, while the Social Networking Service (SNS) is rising as a new shopping platform and transactions between individuals are increasing, also increasing are the cases of unfair transactions and illegal activities committed by the sellers. Therefore, the Sungkyun Times (SKT) will look into the light and dark sides of the SNS marketplace, a new shopping environment.

About the SNS Market

The Appearance and Rise of the SNS Market

The SNS market refers to the market for purchasing and selling products on social media platforms such as Facebook, Instagram, Youtube, and blogs. The transaction usually occurs between individuals on nonofficial shopping sites. The initial appearance of the SNS market occurred when joint purchase or flea markets took place via social community sites and blogs. For example, bloggers would make posts announcing the joint purchase, and their followers would leave comments or send messages to purchase the products. The SNS market, however, really started to grow when other SNS platforms such as Instagram and Facebook began to be used among sellers. Some of the sellers were influencers who share and promote their preferences and styles over specific fields such as fashion, food, or childcare. Such influencers sell products through joint purchases on their accounts or sell products that they have custom produced.

Types of Reported Issues & Increase in Consumer Consultation Cases over the Years (nexteconomy.co.kr, hankyung.com)

Current Trends

According to Professor Kim Nan-do of the Department of Consumer Science at Seoul National University (SNU), the market size of the Korean SNS market grew to 20 trillion won. Moreover, according to a study conducted by the Seoul Metropolitan City Government in 2018, more than half SNS users, 51.6% (or 1782 people), have had experience 29 in purchasing products through SNS platforms. The products that they most often purchased were clothing and fashion goods (67%), lifestyle goods and car care products (39.7%), food and health products (39.5%), cosmetics and perfumes (39.2%), and child and infant products (17.1%). The users of the SNS markets said that the main reason they used the market was that it provides opportunities to buy foreign products that are not sold domestically or those custom made products that are only sold via influencer’s accounts.

The Issues Associated with SNS Markets

Increasing Cases of Damage

The growth of SNS markets, however, has brought an increase in the number of cases of damage to customers due to incorrect information or false advertising. In fact, according to the report by the Seoul Electronic Commerce Center (SECC), the reported damage cases of the SNS market increased eight times from 106 in 2014 to 814 in 2017. According to the same report, the types of damage cases include the unannounced termination of business, disconnection with the seller, delayed delivery, and defective products.

Escaping Legal Sanctions

A Blogger’s No-Refund Policy (news.joins.com)

Most SNS market sellers are not officially registered as online commercial retailers. In this case, therefore, the transaction is classified as “transactions between individuals” and thus offer unfair conditions to the customers. According to the SECC, the customers have the right to ask for a refund or an exchange within seven days from the date a consumer makes an order, yet many sellers ignore the law. Additionally, the Fair Trade Committee and the National Tax Service (NTS) are not doing much to alleviate the issue.

Tax Evasion

A significant amount of transactions in the SNS markets are done via cash. The customer transfers money into the seller’s bank account, and the seller usually provides no cash receipts. Such behavior, however, is illegal and can be penalized by current law. In particular, not officially listing the price of the product on their promotion posts, or requiring private comments or Direct Message (DM) for the actual price of the product are ways used to evade paying tax. As such, the related organizations are having difficulty in tracking the transaction history, income, and the seller’s identification information to collect taxes.

Towards a Healthier SNS Market

To prevent potential financial loss in the SNS market, the customer must check the seller’s business registration and online retail commerce registration numbers. Moreover, checking the list of problematic sellers provided by the Fair Trade Commission on their homepage can offer further guidance. In addition to the efforts made by the customers, changes should be made in the policy and the law to further ameliorate the issues associated with the SNS market. To create a transparent SNS market, the Act on the Consumer Protection in the Electronic Commerce Transaction, that regulates online transactions by protecting customers from unfair treatment by the sellers, must be applied to transactions between individuals done via SNS as well. Experts also advise the NTS to proactively conduct a market study and encourage active reporting and payment of taxes through incentives such as tax reductions.

The expansion and growth of the SNS market have eased the process of starting a personal business. In other words, it has become easy to sell products in the areas in which one has an interest. The easier access to the business opportunity, however, has given birth to numerous related issues. To prevent any further issues and damages, people should pay keen attention to building a healthy SNS market.

이시후  sarahshilee@gmail.com

<저작권자 © THE SUNGKYUN TIMES, 무단 전재 및 재배포 금지>

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