[Why&Next] Musinsa Hits 1 Trillion Won in Sales... What Divided the Fate of Fashion Platforms

'One Strong, Two Challengers, One Laggard' in Fashion Platforms
Musinsa leads the pack... Abley and Zigzag show solid performance
W Concept: "This year, we aim to expand our scale"

Last year, domestic fashion platforms recorded their highest-ever sales despite sluggish market conditions. Musinsa solidified its position as the top player by achieving sales exceeding 1 trillion won for the first time since its founding. Kakao Style, which operates Abley and Zigzag, performed well with a sales growth rate in the 20% range. Although the fashion market contracted due to the economic downturn, record-breaking sales were achieved. Analysts attribute this to the expansion of sales categories such as cosmetics (beauty), living, and desserts, as well as increased preference for domestic designer brands. However, W Concept, a subsidiary of Shinsegae Group that has shifted to internal management, experienced a decline.

Musinsa solidifies its dominance... Store commission sales up 25%

According to the Financial Supervisory Service's electronic disclosure system on the 10th, Musinsa's sales last year reached 1.2627 trillion won, a 25% increase compared to 2023 sales of 993.1 billion won. Operating profit turned positive at 102.8 billion won. This is the first time Musinsa has recorded sales in the 1 trillion won range. It is analyzed that Musinsa attracted consumers by establishing itself as a major distribution channel for domestic and international designer brands.

Musinsa's growth was driven by commission sales. Commission sales, which form the foundation of Musinsa's (including 29CM) business, are fees received for mediating sales for tenant companies. These commission sales amounted to 485.1 billion won, a 25% increase from 390.4 billion won the previous year. This high growth is attributed to category expansion into beauty, sports, living, and more.

Musinsa's private brand (PB), 'Musinsa Standard,' also continued its growth. Last year, Musinsa's product sales reached 338.2 billion won, approximately 80 billion won more than the 260.5 billion won in 2023. While sales from its own beauty brand (Odd Type) were included, most of the increase came from Musinsa Standard sales. Expanding stores not only in street shops but also in major department stores and shopping malls contributed significantly to sales growth. Musinsa Standard now operates a total of 23 stores, including the recently opened Gimpo Airport branch. Targeting customers in their 20s with affordable prices, it records daily sales of 100 million won.

Musinsa turned its operating profit positive as losses from subsidiaries decreased. Last year, Musinsa recorded operating losses due to subsidiaries such as Musinsa Logistics, SLD T (limited edition and secondhand trading platform 'Sold Out'), and Musinsa Trading. Musinsa Logistics posted a net loss of 4.7 billion won, SLD T 15.7 billion won, and Musinsa Trading 0.5 billion won, each improving from the previous year's net losses of 9 billion won, 29.4 billion won, and 4.6 billion won respectively.

Musinsa plans to strengthen profitability this year by decisively liquidating underperforming subsidiaries and focusing on nurturing new businesses. Earlier this year, the company decided to liquidate About Blank & Co., a subsidiary that lost goodwill due to capital erosion (clothing sales). It will also merge with SLD T. The strategy is to reduce losses and increase business synergy. In the second half of the year, it will launch a new business, the secondhand trading platform 'Musinsa Used.' A Musinsa official explained, "Sold Out operates as a separate application, while Used will be serviced within the Musinsa app. Although not finalized before launch, currently there is no plan for integration."

'Double' Abley and Kakao Style sales grow 20%

Abley Corporation recorded sales of 334.3 billion won last year, a 28% increase from 259.5 billion won the previous year. The overall sales growth reflected the growth of its main platform 'Abley' and new businesses such as the men's fashion platform '4910' and the Japanese fashion platform 'Amud.'

However, Abley posted an operating loss of 15.5 billion won, turning to a deficit. It is analyzed that increased marketing and promotions to expand new businesses worsened profitability. Abley's commission payments last year were 160 billion won, about 60 billion won higher. These commissions include promotion costs for sellers on Abley, Amud, and 4910, as well as payment gateway (PG) fees due to increased transaction volume.

Advertising expenses also increased by about 20 billion won to 42.3 billion won. An Abley official said, "We strengthened marketing to invest in new business expansion and increase brand awareness. We plan to further invest in new businesses this year to enhance platform competitiveness."

Kakao Style recorded sales of 200 billion won and operating profit of 2.2 billion won last year. Sales increased by 22%, and operating profit turned positive, achieving both goals. Kakao Style operates the women's fashion platform 'Zigzag' and the middle-aged women's fashion platform 'Fosty' in the domestic market. The sales increase is attributed to Zigzag expanding into various categories such as desserts and living, and using artificial intelligence (AI) technology to conduct personalized marketing. Personalized marketing involves selecting customers with purchase history and high purchase potential to strengthen personalized recommendation services.

The turnaround to profitability was achieved without deliberately reducing marketing expenses. Last year, Kakao Style's advertising and sales promotion expenses were 27.9 billion won, similar to 31.3 billion won the previous year. A Kakao Style official said, "Although the turnaround to profit was somewhat delayed due to continuous investment, it is meaningful that the profit was not achieved by significantly cutting marketing expenses. This year, we will focus on enhancing platform capabilities."

'The lone underperformer' W Concept shrinks, is internal management a double-edged sword?

W Concept, a subsidiary of SSG.com, was the only fashion platform to experience a decline in sales last year. W Concept is a fashion platform targeting women in their 20s to 40s. Last year's sales were 116.9 billion won, about 20% less than 145.4 billion won the previous year, with operating profit at 1.6 billion won.

Operating profit slightly increased due to cost reductions of about 10 billion won from tightening belts. Among selling and administrative expenses, sales promotion costs related to marketing decreased by about 7 billion won. A W Concept official said, "We strengthened internal management amid consumer sentiment contraction due to high inflation and fierce competition. Since acquisition by Shinsegae Group, we have posted profits for four consecutive years." In 2021, Shinsegae Group signed a contract to acquire all shares of W Concept through SSG.com for 270 billion won.

However, W Concept's performance contrasts sharply with other fashion platforms that saw significant sales growth fueled by the boom in K-fashion and K-beauty. While competing fashion platforms expanded tenant brands into beauty, living, and other fields and ventured into new businesses, W Concept focused on financial soundness by reducing the scale of direct purchasing (1P) and streamlining private brands (PB). Direct purchase products involve the platform managing all processes such as inventory control, selection, and packaging, which incurs high costs, so the scale was significantly reduced.

Industry analysts suggest that W Concept faces growth stagnation. W Concept's transaction volume last year was 577.2 billion won, an increase of 277.2 billion won compared to about 300 billion won when it joined Shinsegae Group. In contrast, 29CM, a fashion platform targeting women of the same age group, surpassed 1 trillion won in transaction volume last year, up from 180 billion won in 2020.

W Concept plans to focus on expanding its scale and transaction volume this year. It will also develop new categories such as living and kids in addition to women's fashion. A company official said, "We will enhance platform competitiveness through strengthening consignment business (3P), content competitiveness centered on short-form videos, and advertising business. We are also reinforcing beauty events, such as launching Beauty Festa in February."