[Exclusive] Concerns Over a Second Time4: Geumgangjehwa Third Generation Operated Fashion Platform, the 'Sangtech Sanctuary'

New Business Led by Kim Jeong-hoon, Vice President of Geumgangjehwa
7% Discount on O.C.O Men's Fashion Platform Gift Cards
Suspicion of Inflated Transaction Volume... Timap, Bait Method

OCO, a men's fashion platform owned by Kim Jeong-hoon, the third-generation former vice president of Kumkang Shoe, is suspected of inflating transaction amounts through discounted sales of cultural gift certificates. This is similar to the gift certificate sales that exacerbated the large-scale settlement delays at Qoo10 Group affiliates TMON and WEMAKEPRICE. OCO has emerged as a 'Sangtech (gift certificate investment) sanctuary' after promising investors an initial public offering (IPO) within four years during this year's fundraising process, raising concerns that a TMON-WEMAKEPRICE incident could recur.

According to our comprehensive investigation on the 11th, OCO sold 50,000 KRW Cultureland gift certificates at a 7% discount price of 46,500 KRW around 8 a.m. on the 7th, and they were all sold out within about an hour. It was confirmed that OCO also sold online cultural gift certificates at a discount rate of around 7% on the 3rd and 6th. OCO sells 50,000 KRW Cultureland gift certificates and cultural gift certificates (10,000 KRW, 30,000 KRW, 50,000 KRW) through its mobile application (app) and website, usually at a 4% discount rate, but irregularly increases the discount rate once or twice a month.

OCO, the Sanctuary of 7% Discounted Gift Certificates

The typical discount rate for gift certificates sold through e-commerce companies is 3-4%. After it became known that TMON and WEMAKEPRICE increased transaction amounts and secured liquidity by selling cultural gift certificates at a 7-10% discount to cover operating funds, most e-commerce platforms have refrained from offering discounts exceeding 4%. Lotte ON and SSG.com are selling cultural gift certificates at regular prices, and Gmarket applies discounts of about 2-4%. Fashion platforms such as Musinsa, W Concept, 29CM, Ably, and Zigzag do not sell cultural gift certificates at all.

OCO's high discount rate on gift certificates appears to be used as bait to attract Sangtech enthusiasts. Consumers purchase cultural gift certificates with credit cards and then convert them into points from simple payment companies to cash out and gain profits. Currently, the exchange fee for Naver Pay points is 6.5%. To make a profit, one must purchase gift certificates with a discount rate higher than the fee.

Because of this, even after the TMON-WEMAKEPRICE incident in July, OCO, which offered gift certificates at around an 8% discount rate, was shared on internet communities as a 'Sangtech sanctuary.' On that day, gift certificates, cultural gift certificates, and Cultureland appeared among OCO's top popular search terms, indicating many consumers are looking for gift certificates on this platform.

Kim Jeong-hoon, Third Generation Vice President of Kumkang, Faces New Business Slump... OCO, Approaching IPO, Accused of Inflating Transaction Amounts

OCO started in 2020 as the Bijebano business division owned by Kim Jeong-hoon, eldest son of Kumkang Shoe Group Chairman Kim Seong-hwan, and became an independent corporation in June this year. Bijebano is a personal company 100% owned by Kim, originally a women's specialized shoe brand but now engaged in real estate leasing using owned properties.

OCO, which separated from Bijebano, raised approximately 850 million KRW through the crowdfunding site 'Crowdy' in July and September, with 749 million KRW and 101 million KRW respectively. According to the funding proposal submitted at the time, OCO set a goal to increase its transaction amount from 34 billion KRW last year to 70 billion KRW in its fifth business year (July 2024 to June 2025). It also plans to record 170 billion KRW in transaction volume and 2 billion KRW in operating profit by 2026, and grow into a company with 500 billion KRW in transaction volume and 20 billion KRW in operating profit by 2028, followed by an IPO. Industry insiders believe OCO has engaged in aggressive gift certificate discount sales to achieve these goals.

Kim Jeong-hoon is the largest shareholder of Kumkang, the holding company of Kumkang Shoe Group, holding 81.85% of shares. For over ten years, he has ventured into fashion accessory businesses such as Lesmore, Spris, Xenia, and Pony to prepare for the shrinking shoe market, but results have been poor. Most of these businesses, including Lesmore, Spris, Xenia, and Pony, have been discontinued, and Frisbee, an Apple partner distributor launched in 2009 through Gala International (50% stake), has seen declining sales annually due to Apple's direct entry into Korea. Facing poor performance in previous ventures, Kim appears to be betting heavily on the fashion platform.

'Gift Certificate Kkang' That Worsened TMON-WEMAKEPRICE Incident... OCO Says "Marketing Tool to Attract Platform Users"

The problem is that OCO's discounted gift certificate sales could become a 'time bomb' like the WEMAKEPRICE incident. Before the settlement delay issues with sellers at TMON and WEMAKEPRICE escalated, they sold prepaid recharge funds and gift certificates in bulk at discounted prices. TMON sold 'TMON Cash' at a 10% discount and sold Happy Money gift certificates and 50,000 KRW Cultureland gift certificates at 46,250 KRW and 46,400 KRW respectively.

As a result, Sangtech enthusiasts flocked to buy gift certificates at low prices, worsening the settlement delay damage. According to EasyAworks Mobile Index, TMON app's monthly active users (MAU) increased from about 3.4 million at the beginning of this year to 4.1 million in June before the TMON-WEMAKEPRICE incident. However, as the settlement delay issue intensified, partners blocked the use of gift certificates sold by TMON and WEMAKEPRICE, rendering those gift certificates worthless.

TMON and WEMAKEPRICE are also suspected of covering funds by selling large quantities of discounted gift certificates to support the Nasdaq listing of Qoo10 Group's key subsidiary, Qoo10 Express. As competition in the domestic e-commerce market intensified and growth slowed, they generated transactions through discounted gift certificate sales, but the costs incurred from excessive discounts worsened their financial difficulties. A fashion industry insider said, "With the economic downturn reducing consumption and poor fashion market conditions, it will not be easy for OCO to increase sales as planned. Competition among fashion platforms is intensifying, so we need to watch closely going forward."

However, OCO claims that such discounted gift certificate sales are a marketing tool to increase platform usage. An OCO representative said, "Gift certificate sales are intended to attract customers who can use them on our own mall. We have not increased sales volume and maintain it as before, and payments to issuers are properly made."