[The Crisis of e-Commerce]③ "Investment Road Blocked"... The Three Luxury Platforms Face 'Existence Crisis'

Luxury Market Slump Puts Platform in Crisis
Operating at a Loss, Consumer Usage Drops Sharply This Year
Seeking New Revenue Sources but Unable to Find Investors, Facing a Dilemma

The luxury e-commerce platforms MustIt, Trendevi, and Ballan?collectively known as 'Meo-Teu-Bal'?which experienced explosive growth during the COVID-19 pandemic, are now at a crossroads this year. Following a halving of sales last year that led to financial difficulties, the platforms have faced setbacks in securing funding after the large-scale unsettled payment incidents involving Qoo10-affiliated WEMAKEPRICE and TMON (Timep) this year. The economic downturn has sharply reduced luxury consumption, threatening the survival of these companies.

According to the e-commerce industry on the 21st, these three luxury platforms have actively pursued investor relations (IR) efforts to attract investments since last year but have yet to achieve significant results. Only Trendevi managed to secure a 'Series E' investment round in June, just before the Timep incident. Although the investment amount was not disclosed, industry estimates place it around 6 billion KRW. This falls short compared to previous rounds: Series D (35 billion KRW), Series C (22 billion KRW), and Series B (11 billion KRW).

Difficulty in Raising Funds... MustIt Even Sold Its Office Building

Typically, the Series E stage attracts large investors with expectations of an IPO. However, Trendevi lowered the conversion price of its previously issued convertible bonds (CB) by about one-third, indicating a decline in the company's valuation.

Recently, Ballan has also been considering issuing redeemable convertible preferred shares (RCPS) and convertible bonds (CB) to attract investment, as it has become difficult to gather investors for funding rounds. A Ballan representative explained, "Although the amount is not yet determined, we are discussing CB issuance with existing investors because funds are needed to expand our new global mall business. We plan to secure investments through a two-track approach targeting both overseas and domestic investors."

MustIt has also sought investment from investors but has not received additional funding since CJ ENM's investment in 2022. A source from the capital market stated, "Investors are hesitant even about SSG.com, affiliated with Shinsegae Group, so it is uncertain whether investments will be made in luxury platforms."

Among these three platforms, only MustIt, which secured some cash by selling its office building in Sinsa-dong, Gangnam-gu, Seoul last year, holds cash reserves above 3 billion KRW. According to audit reports, as of the end of last year, MustIt had cash equivalents of 13.4 billion KRW, Ballan 3.4 billion KRW, and Trendevi 3.3 billion KRW. Their capital has been shrinking annually due to accumulated deficits amounting to hundreds of billions of KRW. The accumulated deficits stand at 78.5 billion KRW for Ballan, 65.4 billion KRW for Trendevi, and 23.6 billion KRW for MustIt.

Three Luxury Platforms See Sales Halved... Sharp Decline in Visitors This Year

Investors hesitate to inject funds into the three luxury platforms due to their financial performance. According to the Financial Supervisory Service's electronic disclosure system, MustIt, Trendevi, and Ballan have recorded losses for three consecutive years from 2021 to 2023. Although the deficit narrowed last year, this was due to restructuring and cost-cutting measures amid a shrinking luxury market, focusing on internal management.

The problem is that their scale is shrinking. Ballan's sales dropped by more than half from 89.1 billion KRW last year to 39.2 billion KRW. During the same period, Trendevi's sales plunged from 88.2 billion KRW to 40.1 billion KRW, and MustIt’s sales decreased by 24%. This is a result of luxury consumers shifting back to offline markets following the transition to the COVID-19 endemic phase.

The outlook for this year's performance is also bleak. Consumer sentiment has weakened so much that department store luxury sales growth rates have fallen from double digits to single digits. In fact, the monthly unique visitors (MUV) for all three platforms have sharply declined.

The largest customer attrition occurred at MustIt. From January to August this year, MustIt's MUV dropped from 690,000 to 430,000, a decrease of about 260,000. Compared to the past, the decline is even more significant. Two years ago, MustIt's MUV was 3.16 million?seven times higher than the current figure?making it the platform with the largest customer base in the industry. However, it now has the lowest MUV. While Trendevi and Ballan have been devising new business strategies, MustIt’s decision to maintain a high discount rate strategy proved to be a misstep.

Trendevi’s MUV this year has hovered between 550,000 and 600,000. Although there is no marked upward trend, the monthly unique visitors remain above 500,000. Ballan has shown a slight increase in MUV this year, rising gradually from 850,000 to 920,000, though it has not reached one million. While detailed comparisons of transaction volume and unit price are necessary, generally, the more visitors an app has, the higher the sales tend to be.

The sales impact is also affecting company operations. MustIt’s workforce shrank from 118 employees at the beginning of this year to 61 as of August, a reduction of 57 employees. The decline in app users made company operations difficult, prompting restructuring. As the longest-established platform, MustIt was the only luxury platform to employ over 110 staff members until early this year. However, unable to bear labor costs, it conducted voluntary retirements with one month’s severance pay. An industry insider revealed, "Following the large-scale departure of employees, the internal atmosphere remains unsettled."

During the same period, Trendevi’s staff increased slightly from 76 to 79, while Ballan’s workforce decreased from 64 to 53.