Linkshops, once touted as one of South Korea’s next unicorn candidates, filed for bankruptcy last month despite raising $15.4 billion from investors including prominent US venture capital firm Altos Ventures Management. did.
The company is one of the few South Korean businesses forced to shut down amid a bleak outlook for the domestic e-commerce market, which faces growing headwinds, from weak demand post-pandemic to fierce competition from rising Chinese peers. It was one of the e-commerce startups. Better deal.
The total Series A funding for Korean e-commerce startups from October 2023 to March 2024 was 30.6 billion won (22.7 million won), according to data from Seoul-based venture capital and startup funding tracking firm The VC on Tuesday. USD), which is only one-third of the total amount. Fundraising took place in the same sector at the same time last year.
During the cited period, the total number of VC deals in the Korean e-commerce field also decreased from 22 to 9.
Compared to the same period two years ago, when the total number of deals reached 27, total Series A funding has plummeted by a factor of 10.
Series A funding (a funding round that typically raises between $2 million and $15 million) means investors are looking for companies that not only have a great idea, but also a strong strategy to make that idea a success. It is considered a barometer of a startup’s growth potential. -Make business.
The slump in Series A funding for e-commerce startups highlights venture capital’s bleak outlook for the e-commerce market.
In stark contrast, Korean AI startups have raised a total of 107.2 billion won in Series A funding rounds in the past six months, an 80% increase year-on-year. The total number of transactions also increased from 14 to 18.
A source in the VC industry said, “Money, which chased the e-commerce boom a few years ago, has shifted direction to infuse AI and deep technology.” “Early stage investments in e-commerce have virtually disappeared.”
Without spectacular innovation, no one is safe
Clothing wholesale intermediary platform LinkShops blamed the collapse on the rise of China-based fashion platforms that offer much cheaper clothing, mainly produced and shipped in Guangzhou.
Founded in 2015, this Korean e-commerce site sells domestically and internationally from the Dongdaemun and Namdaemun fashion wholesale markets, which are Korean shopping meccas for clothing and other fashion items designed and sold by independent brands and stores. of companies have made it available for purchase.
The company said the bankruptcy came so suddenly that it did not have time to find new investors or sell the business with its hands tied behind its back.
Other once-promising Korean e-commerce platforms are in the same situation.
OKKOT, a wholesale next-day flower delivery platform, and Onul Siktak’s Onul-hoi, a same-day delivery market for fresh seafood, have suspended their services.
Salad delivery site Freshcode suffered the same fate.
A related industry source said, “Karly, which had already received investment before its IPO, is still suffering losses, suggesting that it will take a very long time for e-commerce startups to become profitable.” Ta. “Venture capitalists no longer have patience for winter funding.”
Some investors believe that South Korea’s e-commerce market is already a red ocean dominated by a few large companies such as Coupang and Gmarket, while large vertical startups such as Curly and Avery They argue that companies are fiercely competing for niche markets.
To make matters worse, three major Chinese e-commerce operators, AliExpress, Temu, and Shein, are rapidly expanding their presence in South Korea, posing a major threat to emerging Korean e-commerce startups.
“There is no room for new e-commerce platforms unless there are new e-commerce platforms with incredibly innovative business models like drone delivery services,” said one venture capital source.
ideas and prices
With the market so crowded, pricing, rather than technology or services, has become the key success factor in the e-commerce market, forcing mobile marketplaces to engage in price competition.
This is a complete U-turn from the industry’s early start-up business strategy of leading market innovation with new services like Market Kurly’s next-day delivery and Ably’s AI-powered product curation and recommendations.
To escape the vicious cycle, some e-commerce startups are aggressively expanding into overseas markets to find new demand.
NoTag Shop is an electrical marketplace for Korean products targeting consumers in Southeast Asian countries, managing 59 channels in 12 countries including Hong Kong, Indonesia, Singapore, Malaysia, Taiwan, Vietnam, and Thailand.
Go2Joy operates a hotel booking platform in Vietnam and Maccaron is currently India’s largest e-commerce site selling Korean beauty products.
Three startups recently successfully raised Series A funding.
Write destination Ko Eun-yi koko@hankyung.com
Sookyung Seo edited this article.
