April 20, 2022
SEOUL – Large retailers including Hanwha and Shinsegae are keen to jump into the e-commerce market for designer brands as existing online platforms are struggling to beat off a counterfeit luxury goods scandal.
Online shopping malls for designer brands such as Mustit, Balaan and Trenbe have enjoyed a boom in Korea by offering convenience and prices lower than department stores or duty-free shops to the country’s growing number of luxury consumers who spent more during the pandemic.
These online platforms bring in brand-name clothes and other products from overseas designer boutiques, parallel importers and individual sellers among others, but with increasing sales volumes and counterfeit traders, it has become harder for them to vet for fake items.
In January, Naver’s online resale platform Kream announced that T-shirts of luxury fashion label Fear of God, which a consumer bought from Musinsa, Korea’s largest online fashion platform by sales, and tried to resell on Kream, turned out to be fake.
Musinsa strongly denied the claim and threatened to take legal action, but ended up apologizing and reimbursing customers twice the price they paid after Fear of God concluded that the T-shirts were indeed fake.
Musinsa said it will improve its luxury goods inspection system, and expand sales as an official partner of the brands, while Kream got to boast its own inspection system, a key function of a resale platform.
Major online shopping malls Mustit and Trenbe rushed to issue statements saying they were running 24-hour monitoring programs, requiring product guarantee documentation by sellers, and fostering designer product inspection experts.
Balaan said it was considering acquiring or partnering with luxury brand appraisal firms and planning to use nonfungible tokens to provide blockchain warranties on luxury goods.
But as it is nearly impossible to completely block crafty counterfeit traders from finding loopholes, consumers have to either choose from paying less for luxury items at the risk of them being fake, or paying full price at department stores.
At this precise time of crisis for online luxury sellers, affiliates of conglomerates that own nationwide networks of department stores are taking steps to get a piece of the pie.
Hanwha Solutions Corp., which merged with department store operator Hanwha Galleria last year, has set up a subsidiary for e-commerce of luxury goods, and is hiring retail experts to tap into the burgeoning market.
Shinsegae Group is expanding online sales of designer goods through ssg.com. Ssg.com recently signed official partnership deals with luxury brands, and introduced a digital warranty system using NFTs to prove that brand-name products sold on ssg.com are authentic.
Lotte Shopping’s online platform Lotte On opened a beauty section that sells premium cosmetics brands, saying it will later expand online sales of high-end products to fashion and home goods.
As these large retailers directly import the products from luxury brands through their affiliated department stores, their authenticity is guaranteed, but product volumes are often limited and prices can be higher compared to parallel imports.