High tech and high culture - South Korea
South Korea is one of the world’s top 15 economies wih very high standard of living. The Vaillant sales company has been working there since August 2014.
It all starts in Seoul
Almost a two-hour flight from Beijing the South Korean market is opening up in Seoul. The Vaillant sales company has been working there since August 2014. In South Korea, there are around 1 million gas wall-hung boiler appliances sold every year in the 50-million-inhabitant country. To date, most of the business in Korea has been done by a number of domestic and one Japanese manufacturer, whose devices, however, have a somewhat limited lifespan of around seven to ten years.
The starting point for the South Korean sales company is obvious: Seoul. More than ten million people live in the capital city and 23 million live in the metropolitan region – in other words, around 46 per cent of all South Koreans. “That is our target region; the one we want to concentrate on first,” explains Country Director Peter Son. At present, around 15.7 million South Korean households are connected to the gas grid, with 12.2 million households – that is, almost all – using gas-fired heating appliances. The government is in the process of expanding the gas grid further.
A recent visit by Dr Andree Groos, Managing Director Sales, Marketing and Service, also emphasizes the importance of the South Korean market. “The potential here is enormous. I am fully convinced of this market. Our long-term goal is five to ten per cent market share,” says Peter Son.
A partner network is the key for being premium
The premium segment is expected to expand from one percent up to ten per cent of the gas boiler market. “This segment is growing,” declares Son. “We are the first European premium brand to present its quality – in terms both of products and services. That is a good way to set a new standard in the market. Any competitor that follows us will have to live up to our standards. If they don’t, they will not be perceived as premium suppliers.”
In the first market development, the Seoul metropolitan region will be the focal point. “We are using the first period to develop our local brand awareness and to improve and stabilize our service quality.” The focal point for a second phase will be the “second-tier” cities, such as Busan and Daegu in the south of the country.
Gangnam - the perfect surrounding for premium products
Peter Son and his team of seven employees are still working flat out to establish a partner network. “It is very important that we find the right partners that can live up to our expectations and those of our customers.” The intention is to set up showrooms at the partners’ shops. Currently Vaillant boilers are displayed in a training room of KEMEA, the Korean boiler installers’ association. “We also intend to install our appliances at the exhibition halls of the Korea City Gas Association and Korea Gas Corporation.” The next step will be to operate a retail shop in the popular department stores in Seoul. “We will then be the first company in Korea promoting boilers inside a department store,” said Peter Son. Another touchpoint is the company’s own customer forum in the suitable surroundings of the Gangnam district. This is one of the wealthiest quarters in South Korea, well known for its exclusive shops and the perfect environment for the premium segment. The opening of the customer forum took place in September 2015.
“Made in Germany” counts
In South Korea, the Vaillant Group is putting its focus consistently and exclusively on high-efficiency technology. Official sales of the ecoTEC plus combi appliance have started in September 2015. The portfolio will be expanded step by step. South Korea is heavily dependent on fossil fuels and energy imports, explains Peter Son. That is why the government is counting on renewable energy sources and energy efficiency, supporting companies that do research and development for developing highly efficient appliances and components. “Currently, the government subsidizes the development of high efficient pumps.”
The customer target group is clearly defined: The upper middle class and above, and homeowners with a net monthly household income of more than seven million South Korean won (KRW), the equivalent of around 5,000 euros. The key targeted customers are between 35 to 60 years old, drive German cars – and love products “made in Germany”. Their greatest concerns are high comfort in heating and hot water supply while being trustworthy regarding to safety features of a gas heating appliances. The ordinary boilers that are currently often operated in Korea are not always able to guarantee this in the hard winters.
Korean customers are generally regarded as highly sophisticated and the market is an ideal testing bench for new products. Peter Son can therefore see another additional advantage: “If we get positive customer feedback in this market, we will also have good prospects in other Asian markets.” This is because Korean customers’ high standards are well known far beyond the country’s borders. “Being successful in South Korea is a strong argument for convincing customers across Asia of the quality of Vaillant products.”