Recently, as Balaan has entered corporate rehabilitation proceedings, a sense of crisis is spreading throughout the luxury platform industry, and luxury platforms affiliated with large corporations are expanding their businesses based on stable capital.
According to the retail industry on the 15th, Balaan applied for corporate rehabilitation proceedings in court on the 31st of last month after failing to settle sales payments amounting to hundreds of millions of won. This was due to difficulties in securing funding as planned investments were not realized in time.
Amid this crisis, concerns are also spreading about the first-generation luxury platforms Must It and Trenbe, which have been associated with Balaan. Like Balaan, these companies have grown based on attracting external investments. In particular, following the COVID-19 pandemic, online luxury consumption centered on the MZ generation (those born from 1980 to 2000) increased, raising expectations.
However, luxury consumption has decreased due to the sharply contracted economy since last year, impacting performances. Must It recorded sales of 11.9 billion won and an operating loss of 7.3 billion won last year. Compared to 2023, sales dropped by 52.2%, and the deficit increased by approximately 36 million won.
Trenbe has not yet announced its performance for last year, but forecasts suggest that it likely incurred losses. The company recorded a deficit of 3.2 billion won in 2023. Must It and Trenbe are hastily speeding up their settlement cycles to prevent the outflow of sellers following the Balaan incident.
Even amid the widespread sense of crisis in the luxury platform sector, platforms affiliated with large corporations appear to be expanding their luxury transaction businesses. They have stable capital structures, eliminating the need to attract external investments, and can appeal to both sellers and buyers based on high brand recognition.
Additionally, luxury platforms affiliated with large corporations that have a department store-based distribution network are relatively free from issues of platform credibility, such as the so-called 'fake product controversy.' Indeed, Balaan has a history of high-priced Nike sneakers over 1 million won and a hooded zip-up product worth 300,000 won being identified as counterfeit. An industry insider noted that "following the T-Money and WeMakePrice incident and the Balaan situation, sellers have become increasingly concerned about the platform's credibility itself."
Lotte On, an e-commerce platform under Lotte Shopping, introduced a luxury specialty section called "On and the Luxury" in September 2022 and recorded an average annual sales growth of over 20% until last year. The company established a 'luxury showroom' section in November of last year, showcasing over 150,000 foreign luxury items in a fashion magazine format and added features for direct overseas shipping. Lotte On stated, "By shortening the distribution process, we can offer products at reasonable prices and present highly sought-after items that were previously difficult to access domestically."
SSG.com, an e-commerce platform under Shinsegae Group, revamped its luxury specialty section "SSG Luxury," a vertical platform launched in 2022, last year. It gathered all products and services related to luxury in an 'in-app app' to improve accessibility. The company plans to develop SSG Luxury as a major business this year.
There are also movements to actively absorb sellers from Balaan, which has entered corporate rehabilitation. 11Street, which operates the luxury vertical platform OOAh luxe, recently announced it would provide a secure settlement service for sellers facing difficulties due to Balaan's settlement delays. It will first pay 70% of the settlement amount the day after delivery, with the remaining 30% paid the day after the customer confirms the purchase, significantly speeding up the settlement date by about 7 days compared to previous times. 11Street also stated it would offer secure settlement services to sellers wishing to newly join OOAh luxe.
11Street plans to expose products of sellers affected by Balaan's settlement delays in high-visibility sales corners and additionally provide discounts through 11Street and Shinhan Card. A representative from 11Street remarked, "By offering various benefits, we aim to attract loyal sellers and continue to coexist with them," adding that the number of products available at OOAh luxe has steadily grown, rising by 115% compared to January this year.
Professor Seo Yong-gu from Sookmyung Women's University noted that "platform corporations based on external investments need sufficient sales support to sustain, and as consumer sentiment in the luxury market worsens due to the economic downturn, corporations like Balaan with weak financial structures are the first to be impacted." He added, "As the structure within the luxury market is being restructured, it is possible that platforms affiliated with large corporations may gain a reflexive benefit."