[Why&Next]The "Unicorn Dream" Fades... Fashion Platforms Raise the White Flag One After Another

Brandi Follows Timapeu and Ballan into Corporate Rehabilitation
Online Growth Slows... Cross-Border Shopping Emerges as a Threat
Restructuring in the Fashion Platform Sector Likely to Continue for Now

Fashion platforms that once aspired to become "unicorns" (startups valued at 1 trillion won) are now raising the white flag one after another. This is due to a combination of factors: a slowdown in domestic consumption, shrinking investments, and the rise of cross-border e-commerce. To make matters worse, the once-unstoppable growth rate of the online market has also slowed. As a result, restructuring has begun, particularly among smaller platforms facing liquidity crises, raising concerns about a potential wave of bankruptcies in the fashion platform market.

According to industry sources on September 28, Newnex, which operates the fashion platforms Brandi and Hybe, filed for corporate rehabilitation with the Seoul Bankruptcy Court earlier this month. In a notice to sellers, Newnex explained, "This decision is not about winding down or halting the company, but rather a measure to normalize management and correct our financial structure under the court's supervision." The company added, "Despite various efforts such as cost reduction, restructuring, and attracting investment, we have reached a point where it is difficult to cover past debts with our current fixed cost structure."

Newnex, Fully Capital Impaired at Year-End..."Significant Doubt About Going Concern"

According to Newnex's audit report, the company's total equity (net assets) stood at minus 30.6 billion won at the end of last year, indicating full capital impairment. Capital impairment means that even if the company is liquidated, there would be less money left than the original invested capital, making it impossible for investors to recover their funds. When deficits persist and total equity turns negative, it is considered full capital impairment.

Newnex's revenue dropped sharply from 85.8 billion won in 2020 to 19.6 billion won last year, a decrease of about 4.4 times, and the company has been posting operating losses for over five years. As a result, accumulated deficits surged from 32.4 billion won in 2020 to 243.1 billion won last year, more than a sevenfold increase.

Founded in 2014, Brandi was once considered one of the top three women's fashion platforms alongside Ably and Zigzag. In 2022, it attracted large-scale investment and was spotlighted as a "next unicorn" with a valuation exceeding 1 trillion won. However, as its performance deteriorated and investment efforts failed, the company faced a cash crunch and resorted to borrowing to sustain operations. As of the end of last year, Newnex's liabilities totaled 41.8 billion won, with most of it being current liabilities (32.2 billion won) due within a year. Of this, 21 billion won in short-term loans from KDB Bank and IBK Bank must be repaid within this year.

Samduk Accounting Corporation stated in its audit report, "There is significant uncertainty that raises substantial doubt about the company's ability to continue as a going concern," adding, "Although the company is seeking to reduce fixed costs through workforce cuts and is establishing plans to address liquidity risks, if these plans are disrupted, it may not be able to recover or settle its assets and liabilities through normal business activities." As Newnex failed to show clear improvement despite its self-rescue efforts, it ultimately opted for court protection.

This crisis is not limited to Newnex. Earlier, the fashion platform Ballan filed for corporate rehabilitation in March. As of the end of 2023, Ballan's total equity was minus 7.7 billion won, also indicating capital impairment.

Ably, which ranks first or second in monthly active users (MAU) among fashion platforms, is also capital impaired. Although its revenue grew 28% year-on-year to 334.2 billion won last year, it recorded an operating loss of 15.4 billion won, returning to the red within a year. During this period, net loss was 17.9 billion won, and accumulated deficits increased from 204.2 billion won in 2023 to 222.1 billion won. However, an Ably representative explained, "Last year, we secured large-scale investment and became a unicorn company valued at 3 trillion won. Since then, we have continued to focus on both external growth and internal stability."

Growth Slows, Cross-Border Shopping Rises..."Restructuring Likely to Continue for Now"

Fashion platforms experienced explosive growth as online shopping expanded during the COVID-19 pandemic. However, as the growth of the online market slowed and consumers tightened their spending on fashion items due to economic downturns, fashion platform companies have faced mounting management difficulties.

According to Statistics Korea, the year-on-year growth rate of online shopping transactions has slowed: 10.3% in 2022, 8.3% in 2023, and 5.8% last year. In particular, the fashion market is seeing an even faster slowdown. According to the Ministry of Trade, Industry and Energy, online fashion and accessory sales in the first half of this year fell 5.7% compared to the same period last year, in contrast to cosmetics sales, which increased by 8.6%.

The growing popularity of cross-border shopping is also threatening domestic fashion platforms. According to Statistics Korea, overseas purchases through online shopping in the second quarter of this year reached 1.55 billion dollars, up 15.2% from the previous quarter. Notably, direct purchases from China increased by 24.3% compared to the previous quarter. This is due to the rapid rise in users of the Chinese fashion platform Shein, which has captivated the world with its ultra-low-price strategy and is quickly gaining traction in Korea as well.

According to Mobile Index by IGAWorks, Shein's MAU surged from 110,000 in January 2023 to 2.06 million last month, a 19-fold increase in two years. In contrast, Musinsa and Ably hover just above 5 million, while Zigzag has around 3 million. Brandi's MAU plummeted from 940,000 to 280,000 during the same period. Brandi's estimated monthly credit and debit card transaction volume dropped from 10.74 billion won in January 2023 to 688 million won last month, an 18-fold decrease over two years.

Jung Yeonseung, a professor at Dankook University's School of Business Administration, explained, "We are moving past the era where all platforms could survive, and now we are seeing the emergence of marginal companies. While individual management issues exist, the market size and structure itself are making survival increasingly difficult."

Industry experts predict that restructuring in the fashion platform market will likely continue for some time. Lee Jongwoo, a professor at Ajou University's Department of Business Administration, warned, "Since the Timapeu incident last year, the economy has stagnated and investments have shrunk, making it difficult for loss-making platform companies to survive. To endure losses, companies must convince investors with their differentiation, but those without clear competitive advantages are inevitably facing bankruptcy."