[Inside Chodong] The Ongoing 'Timon-WeMakePrice Fear'... Proactive Response Is Best

"Online intermediary businesses that connect customers and vendors, including e-commerce, are basically like ‘riding a bicycle.’ If the number of customers does not continuously increase, resulting in upward sales growth, or if additional investment funds do not come in, the business will fall over midway. Coupang can be seen as having broken free from this ‘bicycle riding’ cycle."

This explanation was given by a distribution industry insider when asked about the significance of Coupang’s first annual profit last year. Although he was a representative of the offline distribution industry struggling due to competition with Coupang, he expressed joy over Coupang’s first profit, saying it was "an example showing that e-commerce can be stable once it reaches a certain trajectory," which left a strong impression.

His praise for Coupang ironically foreshadowed the settlement delay crisis caused by Tmon and Wemakeprice (Timon and Wemakeprice). This is because online intermediary companies, including Timon, the recently problematic interior sales company Allets, and the delivery agency company Mannacorporation, inherently face similar challenges, and overcoming them is not easy.

If you have ever purchased goods or experienced delivery services online, you might have wondered, "How can online companies sell the same products as offline companies but offer cheaper and more convenient services?" In the distribution industry, this is explained as ‘riding a bicycle.’ Basically, online intermediary companies attract customers by offering discounts or points of up to about 10%. They also often advertise free shipping. Since online intermediaries are companies and companies aim to make profits, how does this competition work?

The answer is ‘customer money.’ Support for customers who purchase first is covered by the money from customers who purchase next. Support for the next customer is covered by the money from the following customer, and so on. Like a bicycle that falls if you stop pedaling, many companies operate on a model where continuous sales or services are necessary to keep the company running. Therefore, to survive, they inevitably have to keep increasing sales, and receiving additional investment funds becomes crucial.

The government has recognized the problem of this business model of using customer money in a revolving manner and has prepared alternatives, such as requiring 100% separate management of prepaid funds based on the revised ‘Electronic Financial Transactions Act’ effective from September 15. This is a financial separation bill for e-commerce, which simply means not to misuse customer money. However, this does not seem to be a sufficient solution. It is not easy for companies that have been using customer money in a revolving manner to immediately separate customer money 100% from the company by next month. Some view the recent settlement delay crisis as companies that could not endure until the September law enforcement have collapsed first.

Concerns that the Wemakeprice crisis could spread further are based on such arguments. Since confusion is expected, the government must prepare countermeasures in advance. Like the ‘Tour de France’ race, a method of continuously repairing the bicycle while riding should be employed to enable a smooth landing. Guiding the business down a gentle downhill slope so that it can run to some extent without pedaling more is also one method. Improvements can be made during this time. It is essential to prevent sudden braking due to problems with the bicycle that would cause a fall. Only then can the damage to intermediary company employees, trading partners, and consumers be minimized."

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