Balaan Ultimately Bankrupt... First-Generation Luxury Platforms Face Survival Test

Balaan, once considered Korea's first-generation online luxury goods platform, has finally entered bankruptcy proceedings. As one of the pillars of the so-called 'Meoteubal' (Must It, Trenbe, and Balaan) trio-which recorded transaction volumes in the hundreds of billions of won and grew rapidly during the COVID-19 pandemic-collapses, experts say the structural vulnerabilities of the online luxury platform business model are now coming to light.

According to the industry on March 4, Balaan was declared bankrupt by the Seoul Bankruptcy Court on February 24. After a payment delay crisis with affiliated sellers, the company filed for corporate rehabilitation in March last year, but ultimately failed to secure additional funding and was pushed out of the market.

Balaan's rise and fall encapsulate the boom and bust of Korea's online luxury platform industry. Founded in 2015, Balaan rapidly scaled up during the COVID-19 period. As overseas travel was restricted and department store visits were limited, luxury consumption shifted online. Balaan's annual transaction volume jumped more than tenfold from 25.6 billion won in 2019 to 315 billion won in 2021, and reached 680 billion won in 2022. The company succeeded in expanding its scale in a short period.

원본보기 아이콘

However, as the pandemic subsided and overseas travel resumed, consumers returned to local purchases, while high interest rates and inflation dampened luxury spending. The surge in online demand during the pandemic became dispersed, and the growth in transaction volume sharply slowed.

Analysts attribute this to a business structure premised on continuous transaction volume growth. First-generation platforms like Balaan adopted an intermediary open-market model that connected overseas boutiques and sellers. This structure allows for rapid expansion of product offerings without inventory risk, making it efficient in an expanding market.

However, profits ultimately come from commissions linked to transaction volume. As sales decrease, financial performance worsens in parallel. Because it is difficult to directly control pricing and margins, there are limited ways to compensate if transaction volumes fall. In fact, according to the 2023 audit report, Balaan's total equity was minus 7.7 billion won, placing the company in a state of complete capital impairment, and revenue plunged by 56% from 89.1 billion won in the previous year to 39.2 billion won.

Yonhap News Agency

원본보기 아이콘

An industry insider said, "The intermediary model itself is not a business with a high-margin structure. To supplement this, companies can expand direct purchasing, but this leads to inventory risk and capital burden, making the structure vulnerable during market contraction."

The competitive landscape also exposed structural limitations. When multiple platforms sell the same brands and products, differentiation is difficult. Ultimately, consumers move based on price, and competition centers on promotions such as discounts, coupons, and credit card rebates. While this was effective for boosting transaction volumes, it entrenched a structure that erodes profitability.

Additionally, the unique characteristics of luxury distribution became a burden. The core asset of luxury platforms is trust in authenticity, but in an open-market structure, platforms cannot fully control price, quality, delivery, or after-sales service. As counterfeit controversies recurred, consumer trust wavered, leading some to return to department stores or official brand online malls. Increased inspection and compensation costs to regain trust further deteriorated profitability.

The trend of global luxury brands reorganizing their online channels around their own malls and official partners also became a variable. As brands tighten control over distribution, product sourcing uncertainties and diminished bargaining power for intermediary platforms become inevitable. This means platform models based on price competition are unlikely to secure a stable long-term position.

원본보기 아이콘

This trend is not limited to Balaan. Since 2021, Must It has posted annual losses of around 10 billion won and reported an operating loss of about 7.9 billion won in 2024. The company took cost-cutting measures, such as selling its office building in Sinsa-dong, Gangnam-gu, Seoul-which had once cost 30 billion won-and moving to a shared office. Trenbe also posted a loss of 3.1 billion won in 2024, marking five consecutive years of deficits.

Industry experts say that first-generation luxury platforms are now entering a period of true survival tests. With large e-commerce companies making full-scale entries into the luxury market, competition is becoming increasingly complex. Comprehensive platforms with financial resources and web traffic are absorbing luxury as part of a "vertical strategy," narrowing the relative position of specialized platforms.

In fact, most companies-including Lotte ON's "On and the Luxury," SSG.com’s "SSG Luxury," 11st's "WooaLux," Coupang's "RLUX," Naver's "High End," and Gmarket's "MXN Commerce Italy"-are leveraging their existing membership bases, payment and logistics infrastructure, and marketing capabilities to make luxury a new growth engine.

Another industry insider said, "The online luxury platform industry, which benefited from the pandemic, has now entered a true 'sorting the wheat from the chaff' phase. Unless these platforms move beyond simple intermediary models and succeed in diversifying revenue streams, further market exits are likely."

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.