Accumulated Deficit Causes Downsizing
"Will Establish a More Efficient Organization Next Year"
Denies 'Trimming Fat' as a Sign of Sale Speculation
Open market 11st is concluding the voluntary retirement application, which is being conducted for the first time since its establishment. Amid accumulated deficits and rumors of forced sale, attention is focused on whether this voluntary retirement will serve as a starting point for improving profitability. 11st expects to have a more efficient organization next year once the voluntary retirement is completed.
Increasing Deficits... Eventually Leading to Voluntary Retirement
According to the industry on the 4th, 11st will close the voluntary retirement application, which started on the 27th of last month, on the 8th. The target is employees aged 35 or older with more than 5 years of service. Those confirmed for voluntary retirement will receive four months' salary and leave the company at the end of this month. This is the first time in 15 years since 11st launched its service in 2008 that it has accepted voluntary retirement applications.
The reason 11st is accepting voluntary retirement applications is due to intensified cutthroat competition in the e-commerce market and prolonged economic recession, which have prevented a breakthrough for performance recovery. Even when the online shopping market showed continuous growth during the COVID-19 pandemic, 11st struggled with deficits. It posted losses for three consecutive years until 2020, and especially last year, operating losses exceeded 150 billion KRW.
Efforts to Improve Profitability Fail to Find a Breakthrough
In December last year, 11st appointed CEO An Jeong-eun, an expert in service planning, and has continued efforts to improve profitability. They have implemented differentiated policies such as offering 'zero commission' benefits for original sellers selling exclusive products and opening a specialty section for cost-effective items under 10,000 KRW, but ultimately failed to find momentum for a turnaround.
The industry interprets 11st's voluntary retirement application as a move to improve profitability through tightened management. 11st also expects to have a more flexible personnel structure through this voluntary retirement. A representative from 11st said, "The company has repeatedly emphasized improving profitability, and as the market environment gradually worsens, we cannot just do nothing," adding, "From the company's perspective, this voluntary retirement is expected to lead to cost reduction and a more efficient organization."
"This Is Not a Slimming Down for the Purpose of Sale"
Some speculate that amid recent rumors of a forced sale, 11st is proactively 'slimming down' its size. Currently, 11st is facing a situation where it could be forcibly sold as its largest shareholder, SK Square, has decided not to exercise the right of first refusal (call option) on the financial investor's 18.18% stake.
Previously, SK Square received a 500 billion KRW investment from financial investors in 2018 on the condition of an IPO within five years. At that time, SK Square included a call option requiring repayment of the investment if the IPO was not completed within the deadline. Furthermore, if SK Square waived the call option, the financial investors could sell 11st, including SK Square's shares, to a third party.
However, 11st insists that the series of situations involving SK Square's waiver of the call option and the voluntary retirement are unrelated. A representative from 11st said, "Although voluntary retirement might appear as a 'slimming down' process leading to a sale on the surface, it is not being conducted for that purpose." They added, "Since voluntary retirement is not mandatory, there is no specific target such as 'how much cost reduction can be achieved' calculated with a calculator."
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