July 26, 2024
SEOUL – Tensions are escalating over the liquidity crisis of online shopping platforms WeMakePrice and Tmon, both owned by Singapore-based e-commerce company Qoo10, sparking massive complaints and fears of wider damage.
The platforms failed to pay money owed to sellers in May, prompting traders to leave the platform as well as customer complaints. In an urgent press conference Thursday, Ryu Hwan-hyun, CEO of WeMakePrice, said the value of delayed payments by the company was some 4 billion won ($2.9 million).
“We offer a deep apology for the delayed payments,” he said at the company headquarters in southern Seoul, where hundreds of consumers had gathered all night to demand compensation. “Qoo10 Group has been working to secure funds to pay sellers.”
Ryu vowed all-out efforts to reduce additional losses in close consultation with Tmon and Qoo10.
“I arrived here today at 8 a.m. to receive the compensation. But nothing has progressed after spending nine hours here,” said Park, a 37-year-old Seoul resident, adding that he was unable to get a refund for a travel package he purchased for his family’s vacation scheduled for August in the Philippines, totaling around 2 million won.
“It’s disappointing that all I could hear from the service providers, including the travel agencies and WeMakePrice, is that they can do nothing except tell me to apply for a refund and wait indefinitely,” he said.
Kim Seo-hyun, a 42-year-old mother who had planned to visit a theme park with her son and daughter, criticized the company’s poor handling of the situation at the site.
“When I first arrived this morning, a company official said that those who signed for the refund by filling out a document would receive the refunds first and that we could go home after completing the documentation,” she said. “But nothing happened. The procedures abruptly changed to an online system where consumers apply for refunds via a QR code, and I received no notice from the company.”
Qoo10 acquired WeMakePrice and Tmon in 2022 and 2023, respectively.
According to market tracker Wiseapp Retail Goods, transactions made on Tmon and WeMakePrice were estimated at 839.8 billion won and 308.2 billion won, respectively, with 4.37 million and 4.32 million monthly users.
Regulators were also ramping up efforts to monitor the situation. The nation’s antitrust watchdog, the Fair Trade Commission, said it started on-site inspections to prevent further losses.
Meanwhile, industry experts suggest that the business disruptions likely occurred because Qoo10 might have used the delayed payments to expand its business with the apparent goal of listing on the stock market in New York. Earlier in February, Qoo10 acquired American e-commerce platform Wish for 230 billion won. It also acquired another Korean e-commerce platform, AK Mall, in March.
“When Qoo10 acquired Tmon and WeMakePrice, it used Qxpress shares instead of money. However, for the Wish acquisition, it had to pay in cash. There are speculations among industry insiders that Qoo10 diverted funds from Tmon and WeMakePrice for the acquisition,” an industry official who wished to remain anonymous said. Qxpress is a logistics company focused on e-commerce.
The official added that Tmon and WeMakePrice were already struggling financially due to an increasingly competitive market environment. Regulatory filings show that Tmon’s cash reserves were 8 billion won as of 2022, down from 55.5 billion won the previous year, while WeMakePrice’s impaired capital reached 239.8 billion won.
Another source pointed out that the main problem was the lack of legal standards for the settlement cycle. “It has been reported that Tmon and WeMakePrice have frequently failed to meet payment settlement dates for sellers since last year, especially around October, when Qoo10 announced it would delay payment dates by two months,” the source said.
Unlike Tmon and WeMakePrice, most e-commerce platforms here, including Auction, Gmarket, Naver Storefarm and 11Street, pay sellers upon consumer purchase confirmation. Coupang, however, takes around one to two months to settle payments.
The source also suggested that the issue centered around travel packages and gift certificates because these items typically have higher transaction values and do not require immediate physical delivery, making it easier for Tmon and WeMakePrice to use them to secure extra cash reserves immediately.
In the meantime, some retailers, including bakery giant SPC Group, have announced they will share the financial damage by offering refunds to customers for purchased products.