Concerns are emerging that the delay in settlement of sales proceeds by luxury platform Balaan could lead to a situation similar to the ‘second Timaf (Timon·WeMakePrice)’ incident. Some sellers have suspended sales of products on Balaan.
◇Investment received, yet settlement delays... What happened to Balaan
According to the online shopping industry on the 26th, Balaan has not been able to pay the settlement amount to sellers since the 24th. They discovered errors in overpayment of the settlement amount during an internal financial review, which necessitated a recalculation.
The company noted in a seller announcement the previous afternoon, “An issue arose regarding past transactions and settlement details during the financial verification process for attracting new investments,” adding, “We are meticulously reviewing past settlement data for all partners to confirm the consistency of settlement amount calculations and payment details. We plan to complete the recalculation by the 26th, and no later than the 28th, we will share the confirmed settlement amounts and payment schedules for each partner.”
Balaan asserts that this settlement delay is different from the liquidity crisis that caused the Timaf situation and that they will also pay interest for the delay. However, the anxiety among partner companies is growing. Previously, shopping platforms including Monogram, Timaf, and Alerts began experiencing settlement delays, leading to closures or corporate recoveries. Balaan reportedly has over 1,300 partner companies.
Sellers are demanding settlements at Balaan’s headquarters in Gangnam, Seoul. On the previous evening, many gathered at the headquarters, prompting a police deployment. A representative from a partner company that attended a settlement-related meeting at the Balaan headquarters said, “The company just repeated the announcements and avoided questions like, ‘Did you receive money from investors? Is there money to be given to us?’ and only kept saying they were sorry.”
On that day, Balaan implemented mandatory remote work for all employees and restricted access to the headquarters for outsiders. In light of this situation, some partner companies, including ‘Luxboy,’ removed their products from Balaan, while others processed items as sold out to prevent further transactions.
A seller who canceled all ordered items from Balaan said, “Cancelling a transaction incurs customer compensation fees, but it seems better than losing the value of the items,” adding, “I understand that we’re talking about sales proceeds ranging from millions to tens of millions of won per partner company.”
◇Balaan in a complete capital impairment state
According to the 2023 audit report of Balaan submitted to the Financial Supervisory Service, the total capital is in a complete capital impairment state of negative 7.7 billion won. As a result, Balaan has been flagged by the monitors for uncertainties regarding its going concern value. The external auditor, Samdo Accounting Firm, stated, “There exists significant uncertainty that may raise substantial doubts regarding the company’s ability to continue as a going concern depending on the final outcomes of the company’s operational performance and capital increase.”
Balaan has been continuously attempting to secure funding; however, due to reduced demand for luxury goods and growing concerns about the Timaf situation, they are facing difficulties in attracting investments. Ultimately, the company’s valuation, which peaked at 300 billion won, was reduced to 30 billion won, leading to a successful conditional investment of 15 billion won from SILICON2 last month. They received 7.5 billion won upfront, with the remaining amount conditional upon achieving milestones of more than 50% direct purchase sales and monthly operating profit by November, nine months later.
However, within a month, the settlement delays for sellers have raised suspicions about liquidity issues. Industry analysts suggest that as Balaan increased the proportion of direct purchase sales after securing investments, transaction volumes from partner companies declined, leading to worsened cash flow. According to partner sellers, Balaan significantly reduced the issuance of coupons for partners to raise the proportion of direct purchases this month. One seller remarked, “Since Balaan cut back on coupons from the 1st of this month, sales have halved.”
Among some sellers, there is a growing movement to receive settlements through payment gateway (PG) companies. In response, Hyphen Corporation, which handles Balaan’s settlement services, stated, “We only provide infrastructure related to Balaan’s settlement payments and do not directly engage with the settlement funds.”
There are also suspicions regarding the non-introduction of the escrow system that Balaan announced in September of last year, which involves a third party holding payment until settlement confirmation. Balaan announced plans to introduce escrow to alleviate seller concerns due to the fragile financial state after the large-scale unsettled payments from Timaf. Regarding this, Balaan responded to ChosunBiz that they are “in the process of verification.”
◇Trenbe and Must It: No problems with settlement delays
Distrust is also spreading towards Trenbe, Must It, and other competing platforms, often referred to as the ‘top three luxury platforms’ alongside Balaan. In this regard, Trenbe sent an email to sellers the day before, stating they have 8 billion won in cash assets. According to Trenbe’s 2024 financial statements, current assets are approximately 8 billion won, and after subtracting accounts payable of 3.5 billion won, cash safety assets amount to approximately 4.5 billion won.
A Trenbe representative stated, “We are stably managing our funds based on cash assets that amount to 2.3 times the amounts scheduled for disbursement to partners, and we continue to settle within the fastest three weeks in the industry. We have not artificially inflated transaction volumes using partner assets or issued excessive coupons to inflate cash assets.”
Must It likewise states that it is unaffected by settlement delays. A Must It representative noted, “As of the end of last year, the total assets were 11.1 billion won, with current assets at 11 billion won and current liabilities at 4.1 billion won, indicating current assets are 2.5 times higher than liabilities. We have not encountered any issues with settlement delays so far, but inquiries from partner sellers are flooding in due to competitor issues.”
Currently, Balaan has not disclosed a new position following the announcement made the previous day. Meanwhile, trust in the platform among sellers is eroding. One seller said, “Even if I receive my settlement this time, I will not sell products on Balaan anymore.”
Balaan maintains that they have sufficient capacity to disburse settlement funds. A Balaan representative stated, “We have currently received 7.5 billion won in investments from SILICON2,” adding, “As announced, once the re-evaluation of the settlement amount is complete, we plan to disburse the payments.”