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High-end online fashion platform Balaan conducts Series C round worth $82 million South Korea’s e-commerce startups are enjoying massive hikes in their valuations on the back of robust online spending by millennials and members of Gen Z.Venture capitalists are betting on the buying power of those in their 30s and younger to bring the platform operators' valuations to join the ranks of unicorns. Balaan, which operates the namesake high-end online fashion platform, is conducting Series C round worth 100 billion won ($82 million).“Judging by the previous round, which was overbooked, the investor sentiment must be bullish during this round as well,” an industry insider familiar with the development told The Korea Economic Daily. The company claims to have the strongest supply chain in Asia by establishing exclusive contracts with major luxury boutiques in Europe. It offers items from 900 fashion houses. On average, Balaan offers its goods 30% cheaper than its European counterparts such as Net-a-Porter or Farfetch. About a dozen investment firms have poured in money into Balaan: namely Company K Partners, Ltd., Daol Investment, and Mirae Asset Venture Investment Co.Balaan is widely expected to begin the process of initial public offering after the Series C is complete.The on-line marketplace for luxury goods is hoping for a valuation of 800 billion won by the time this round of funding wraps up. During the previous round last October, its valuation hovered around 200 billion won. Balaan plans to use the fresh injection of funds to advance its systems and possibly acquire companies that verify the authenticity of luxury goods. It could also expand its offerings to encompass used items, beauty, and watches. The startup’s annual trade volume rose more than 10 times from 25.6 billion won in 2019 to 315 billion won last year. The goal for this year is to reach 1 trillion won. Last year’s revenue reached 52.2 billion won, a 110% jump from the year prior. Must It and its competitors pour in money into marketing by hiring well-known celebrities
THE BIG THREEThree platforms dominate Korea’s luxury fashion e-commerce market: Balaan, MustIt, and Trenbe Inc. The three operators recorded around 300 billion won in trade volume each as of late last year.MustIt boasts price competitiveness and speedy delivery while Trenbe claims its artificial intelligence engine called Trenbot helps provide customized services. Trenbe received funding from IMM Investment Corp., Korea Investment Partners, Atinum Investment, and more. The accumulated funding amount for Trenbe surpasses 50 billion won.Must It, for its part, received funding from Kakao Investment, the venture capital arm of Kakao Corp.At the time of the latest funding rounds, the valuation for Trenbe and Must It reached 300 billion won and 250 billion won respectively. Advertisement for Trenbe Inc. featuring actor Kim Hee-ae The high-end fashion market is growing rapidly in South Korea, especially among the younger generation that are more familiar with shopping on-line than off.South Korea’s luxury goods market size is around 15.9 trillion won to rank the third place in Asia and the seventh worldwide, based on last year’s data compiled by London-based market research firm Euromonitor International.Approximately 1.7 trillion won worth of the luxury goods sales in the country are made on-line, up 7% from the previous figure. About 70% of customers at Balaan, Trenbe, and Must It are either in their 30s or younger, according to online survey provider Open Survey. The companies have yet to prove their profitability, however. Balaan, Trenbe, and Must It recorded losses of 18.6 billion won, 33 billion won, and 10 billion won respectively last year. The e-commerce platform operators’ main sources of revenue are the brokerage commissions that incur from sourcing the pieces at a discount and selling them at a premium to the customers. They are also raising the marketing cost as the competition gets fiercer.The biggest luxury goods e-commerce platform in the world is Farfetch Ltd. The British-Portuguese online retail platform boasts market capitalization of $5.64 billion on the New York Stock Exchange. By Jong-Woo Kimjongwoo@hankyung.comJee Abbey Lee edited this article.
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