Luxury goods 10~15% sales commission
Fashion brands 30~40% applied
Musinsa leads in the service war
Musinsa platform commission in the 30% range
[Asia Economy Reporter Lim Hye-seon] As fashion platform Musinsa begins selecting locations for the first offline store of its private brand (PB) ‘Musinsa Standard,’ love calls from the department store industry continue to pour in.
Love Calls Poured in for ‘Musinsa Standard’
According to the fashion industry on the 25th, Department Store A has entered into negotiations with Musinsa to attract the first offline store of ‘Musinsa Standard,’ but it has been confirmed that a final decision has not been made due to commission fee issues.
A representative from Department Store A said, "Major department stores in the Seoul area as well as large-scale complex shopping malls are negotiating to have Musinsa Standard enter their premises, but Musinsa is demanding preferential commission fees at the level of luxury brands, so a final decision has not been made."
Department stores apply an average sales commission rate of 10-15% for luxury brands such as Chanel, Herm?s, and Louis Vuitton. The sales commission for women’s and men’s fashion brands is 30-40%. Chanel, considered one of the top three luxury brands, has a particularly low commission rate. Musinsa insists that it will not enter department stores unless the sales commission is set at around 10%.
110 Billion KRW from Online Distribution Alone
Launched in 2015, ‘Musinsa Standard’ recorded sales of 110 billion KRW last year. This achievement was made solely through online distribution sales. Currently, about 3,000 Musinsa Standard products are registered on Musinsa. By category, the representative product of Musinsa Standard, slacks, sold more than 1 million units last year alone, and sales of blazer jackets increased by more than 172% compared to 2019.
Musinsa plans to develop ‘Musinsa Standard’ into Korea’s leading basic fashion brand this year. It will clarify the brand identity by offering good quality products at reasonable prices and release products with diversified materials and designs. To expand customer touchpoints, it is also considering entering offline flagship stores.
A fashion industry insider said, "Musinsa is understood to be opening offline flagship stores in the first half of this year to expand customer touchpoints," adding, "From department stores to shopping malls and street stores, they are putting all their efforts into ‘courting Musinsa,’ so Musinsa is in a dominant position."
Attracting the MZ Generation vs. Ecosystem Disruption
Musinsa is an attractive card for the department store industry, which is currently renewing stores to attract younger customers. Although more than half of department store sales are contributed by VIPs in their 40s and 50s, it is difficult to continue growth without drawing younger customers to department stores. Cooperation with Musinsa, known as the ‘playground for people in their teens and twenties,’ can fill the gaps in department stores.
This is why the department stores’ calculations are complicated. If they boost Musinsa’s high demands to secure customers in their teens and twenties, they may face demands for commission reductions from other brands. With dozens of brands emerging every year, department stores have maintained their sales commission policies for decades. Since many brands want to enter department stores, there was no need to lower their stance at the negotiation table. A department store official said, "Musinsa, which charges a 30% sales commission to brands on its own online platform, is demanding an unreasonably low commission from offline distributors," adding, "Compared to Uniqlo’s commission, which has a similar concept, it is about half, so it is difficult to admit Musinsa from the perspective of fairness, and we are struggling with this."
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