Will the 'Timeff Incident' Repeat... Which Fashion Platform Faces 'Management Crisis'?

Fashion platform undergoes payment settlement inspection by financial authorities
Most use escrow with settlements conducted at least once a month

Concerns are rising that the settlement and refund delays seen in TMON and WEMAKEPRICE could be replicated in the fashion platform industry. Most e-commerce companies that expanded during the COVID-19 pandemic have been suffering from chronic deficits, and some fashion platforms facing consumer spending contraction are now encountering financial difficulties.

According to industry sources on the 30th, settlement cycles vary among fashion platforms. The TMON and WEMAKEPRICE incidents were triggered by long settlement periods. TMON settled payments within 40 days from the last day of the month in which the product was sold. WEMAKEPRICE paid the funds on the 7th day two months after the sales month, with settlements sometimes delayed up to 70 days. Without a third-party escrow system to hold payment funds, there was a structure that allowed misuse of sales proceeds. Due to this, the Financial Supervisory Service recently conducted an emergency inspection of payment settlement statuses on fashion vertical platforms.

W Concept Only Subject to the Large-Scale Distribution Business Act

Among large retail companies or online shopping malls classified as telecommunication sales businesses, the 'Act on Fair Transactions in Large-Scale Distribution Business' requires settlements to be completed within 60 days for direct purchases and 40 days for consignment goods from the monthly sales closing date. Among fashion platforms, W Concept, a subsidiary of SSG.com, is the only company subject to these regulations. W Concept sets the 28th of each month as its settlement day.

Other companies are classified as telecommunication sales intermediaries and are not subject to the Large-Scale Distribution Business Act. Musinsa, the largest fashion platform by sales, conducts monthly settlements on the 10th of each month, which can take up to about 40 days. They have also signed a debt payment guarantee contract with Woori Bank to enhance transaction stability. A Musinsa representative said, "Although we are not subject to the Large-Scale Distribution Business Act, we proactively comply with the law to ensure transaction stability."

Ablely conducts settlements twice a month based on orders confirmed as purchased over two-week periods. For example, orders confirmed from the 1st to the 15th are settled on the 25th of the same month, and orders confirmed from the 16th to the end of the month are settled on the 10th of the following month. Kakao Style, which operates Zigzag and Posty, settles payments on the 5th business day after purchase confirmation. Newnex, which operates Brandy and Hybe, sets settlement days on the 10th and 25th.

Among the three luxury platforms, Ballan allows sellers to choose settlement days among the 7th, 15th, and 30th. Mustit sets different settlement days based on seller grades. Sellers are assigned credit ratings from grades 1 to 5 and F grade according to sales performance; grade 1 sellers receive settlements 3 business days after purchase confirmation, while F grade sellers receive settlements after 9 business days. Mustit also has a debt payment guarantee with Shinhan Bank. Trenbe, which has transitioned to a secondhand luxury platform, can settle payments within about 7 days for consignment sales. Although Trenbe has not yet introduced an escrow system, it plans to do so soon.

Concerns Over Financial Difficulties Due to Accumulated Deficits in Small Fashion Platforms

However, concerns among consumers are growing as some fashion platforms are experiencing financial difficulties due to accumulated deficits. Ablely Corporation, which operates the fashion platform Ablely, has recorded capital erosion for five consecutive years. This means that accumulated deficits have completely depleted the initial investment capital. As of last year, the accumulated deficit, or unappropriated retained losses, reached 204.2 billion KRW.

However, the company has steadily attracted investments and holds 150 billion KRW in capital surplus, which can be used to offset deficits. Additionally, as of the end of last year, it had over 100 billion KRW in liquid assets, including 53.1 billion KRW in cash equivalents and 26.1 billion KRW in short-term financial products. Although operating profit turned positive last year with a net income of 5 million KRW, it is expected to take a long time to significantly reduce the accumulated deficit.

The Korea Federation of Small and Medium Business Owners and other representatives of tenant companies affected by the TMON and WEMAKEPRICE incidents held a press conference on the 29th at the People's Solidarity for Participatory Democracy in Seoul to announce cases of damage. The attending representatives are shouting slogans urging for countermeasures. Photo by Younghan Heo younghan@

Luxury platform Ballan also fell into capital erosion as its accumulated deficit grew to 78.4 billion KRW last year. Its liquid assets that can be converted to cash within a year amount to only 5.6 billion KRW, and total assets stand at 7.6 billion KRW. Moreover, Ballan's sales dropped sharply by 59% year-on-year to 39.2 billion KRW last year due to a rapid decline in online luxury consumption. An industry insider from a luxury platform explained, "Ultimately, as the recession period with reduced consumption lengthens, all luxury platforms are facing difficulties."

While not in a state of capital erosion, some companies have seen their deficits rapidly increase due to accumulated losses. Younex, which operates fashion platforms Brandy and Hybe, recorded a net loss of about 50 billion KRW last year, causing its deficit to surge from 146 billion KRW to around 192 billion KRW. Kakao Style also recorded a deficit of 116 billion KRW last year, surpassing the 100 billion KRW mark. Its net loss last year was 18.4 billion KRW.

Companies accumulating retained earnings rather than deficits include Musinsa and W Concept, affiliated with Shinsegae. Both recorded net losses of 11.6 billion KRW and 1 billion KRW respectively last year. However, Musinsa has maintained retained earnings of 200 billion KRW for two consecutive years, and W Concept holds retained earnings in the 20 billion KRW range. An industry insider said, "Due to this incident, it will be difficult for both sellers and consumers to trust companies with low financial stability, such as those with accumulated deficits over several years."

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