'Fashion Revolution' Through Crowdfunding... Zero Return Rate Achieved by Enhancing Cost-Effectiveness

Interview with Hong Jung-woo, CEO of Hago L&F

Only Verified Products Sold Through Weekly Curation Meetings

[Asia Economy Reporter Jo Yoo-jin] "491% growth in monthly transaction volume. Investment offers from multiple venture capitals." This is the one-line report card of the online fashion platform 'Hago.' On the 23rd, at the company headquarters in Nonhyeon-dong, Seoul, Hong Jung-woo, CEO of Hago L&F, said, "In an era of near-infinite product oversupply, our unique competitiveness lies in a strategy that emphasizes 'quality' rather than 'low price.'"

Hago is an online fashion platform launched in April 2018. Its strength lies in 'curation,' where Hago employees personally test and carefully select only products they believe are worth selling. Through weekly meetings, an average of 20 to 30 new brands join the platform each month. CEO Hong emphasized, "Our strength is selling only products whose quality has been verified to meet consumer needs." Although the price range is relatively high, word of mouth about its excellent cost-effectiveness has driven rapid growth.

The 'crowd funding' sales method also differentiates Hago from other platforms. CEO Hong explained, "It is a 'pre-order, post-production' method where products are revealed on the platform and production begins once the target quantity is reached." From the designer's perspective, this reduces offline entry fees and inventory burdens, and securing funds is easier by advancing production costs.

This is a major innovation in the domestic fashion industry, where it can take up to a year to recover production costs. In an era of rocket delivery, the reason consumers enthusiastically embrace a funding method that takes up to a month from order to delivery is simple: they can trust and purchase highly cost-effective products.

The representative product that achieved a big hit through crowd funding is the 'Hago Bag.' Due to soaring popularity, funding was conducted 83 times. More than 15,000 units were sold, with an almost 'zero' return rate (0.8%). CEO Hong self-assessed, "The pre-order, post-production method removed price bubbles, and the quality is absolutely comparable to high-end brands, which is the secret to its popularity."

Brands sold through the crowd funding method are Hago's 'exclusive products.' Currently, exclusive products account for about 30% of Hago's offerings. CEO Hong said, "Exclusive products do not need to compete on price with other platforms, so their profit contribution is high," adding, "Our goal is to increase brand awareness and loyal members to convert to 100% exclusive products within 2 to 3 years."

CEO Hong pointed out, "Although online platforms emphasizing curation functions are flooding the market, it is not easy to maintain such strategies to increase sales." The easiest way to increase sales is to expand the number of brands. He noted, "Platforms engaged in fierce market competition are increasing the number of brands to grow their size, but paradoxically, the more brands they add, the easier it is to fall into deficit." This is because becoming an open market that sells 'products everyone sells' inevitably leads to lowest-price competition.

CEO Hong said, "Top-selling brands listed on the industry's number one platform have begun to enter other platforms one after another," adding, "Lowest-price competition has already begun in the online fashion platform industry." He emphasized, "We do not plan to expand our business just for sales," and stated, "Our policy is to keep the total number of brands below 1,000 (with 500 in fashion alone)."

He continued, "Although the online fashion market has grown tremendously in recent years, both large clothing companies and emerging designer brands are struggling," emphasizing, "To correct this distorted structure, we need to diversify funding products and grow the ecosystem."

This content was produced with the assistance of AI translation services.