[Distribution Hot People] Fashion Revolution Through Direct Sales Removing Distribution Markups

[Asia Economy Reporter Yujin Cho] Production costs including outsole material cost 44,700 KRW, logistics and operating costs 21,300 KRW, wages 11,000 KRW, margin 12,400 KRW... final selling price 98,000 KRW.

The sneaker brand Motherground transparently discloses the cost and margin of all its products. When you buy sneakers priced at 98,000 KRW, you can see the detailed cost components that make up this selling price and how much margin the company earns.

Bobu Store set up in B.4291, a complex cultural space in Nampo-dong, Busan.

On the 29th, Geunbaek Lee, CEO of Motherground, said, "We want to emphasize that by eliminating middle distribution margins, we can create products at reasonable prices, so we transparently disclose the cost of all products." Motherground is an online-based fashion brand that offers items such as bags and clothing centered on sneakers, eliminating middle distribution stages and selling all products directly to consumers. CEO Lee emphasized, "By not going through typical distribution channels like online shopping platforms or department stores, we lowered prices by up to 30% compared to competitors."

They introduced a direct sales method to reduce business risks faced by small fashion brands, such as competitive disadvantages caused by high entry fees and multi-level distribution margins. The idea was to reduce the complex distribution structure that inflates prices, form more affordable prices, and create a structure where the brand can be self-sustaining.

To this end, they built their own offline distribution networks such as 'Bobu Store' and 'Sinyaljang' centered on their official mall. CEO Lee explained, "To minimize commissions, instead of fashion retail stores, we operate Bobu Stores in the form of shop-in-shop in cafes or complex cultural spaces," and added, "We do not consider entry into famous fashion select shops or commerce companies to eliminate price-increasing factors."

They also operate spaces where customers can constantly experience the products. CEO Lee said, "We operate a space called Sinyaljang where customers can try products at a hotel in Jeju Island and cafes in Yeonnam-dong and Seongsu-dong," and explained, "Customers can try the products there and also make purchases."

Motherground was launched in February 2017 through crowdfunding on the Tumblbug site. At that time, it was a huge hit, achieving ten times the target amount with a single item, and later gained recognition through word of mouth on social network services (SNS) such as Instagram. The unique outsole design resembling 'contour lines' or tree 'growth rings' and the carved Chinese characters on the heel gained great popularity among young people in their 20s and 30s, maintaining an annual sales growth rate in the 40% range.

Recently, it was selected as a collaborative brand for the public brand 'Seoul Made' by the Seoul Business Agency (SBA) and is preparing to launch a new collection. It is also expanding its recognition by releasing collaborative products with Kolon Sports, operated by Kolon Industries FnC division (hereinafter Kolon FnC). Next year, it plans to expand overseas markets starting with Thailand, followed by Japan and the United Arab Emirates.

This achievement is significant as it was accomplished while domestic fashion companies’ performances were all declining due to the COVID-19 pandemic. To respond to increasing overseas demand, they have also completed the construction of an overseas-dedicated site. CEO Lee said, "We plan to open a global site next month that can deliver to countries worldwide."