Balaan faces uncertain future
Balaan's online shopping mall displays various luxury items on its platform on Feb. 3. Screencaptured from Balaan's website
By Kim Jae-heun
The online luxury goods shopping platform Balaan is facing growing doubts over the feasibility of its business after its operating loss doubled last year, from 2021, due to high marketing and advertising expenses, according to industry officials Thursday.
The company's auditor Samdo Accounting's remarks that questioned Balaan's financial viability have further fueled concerns over the luxury goods sales platform.
Balaan's sales grew 71 percent in 2022 to 89.1 billion won ($67.91 million) from 2021, with its transaction value also jumping 127 percent to reach 680 billion won.
However, the company's operating loss doubled from 18.6 billion won in 2021 to 37.4 billion won in 2022. Balaan's net loss also increased two-fold from 19 billion won to 38 billion won, over the same period.
“Balaan's current financial status indicates that there are significant uncertainties that could raise questions about its viability as a continuing company,” Samdo Accounting Firm said in a report filed to DART, the Financial Supervisory Service's electronic disclosure board.
Balaan's high spending on advertisements led to its increased operating losses. The luxury shopping platform spent 38.6 billion won on advertising last year, double the amount it spent in the previous year.
Actress Kim Hye-soo appears in Balaan's television commercial / Courtesy of Balaan
The company hired renowned actress Kim Hye-soo as its commercial model in September 2021 to focus on raising brand awareness. Its aggressive marketing was a prerequisite to compete against big rivals such as Tren:be and Must It.
Until last year, Balaan's expenditure to expand its business exceeded that of the investment it received ― affecting its cashable assets to decrease sharply from 21.3 billion won in late 2021 to 3.2 billion won in late 2022.
But Balaan paints a less dire picture.
“(Samdo Accounting Firm's assessment) was made based on accounting standards, not to warn that the company is at actual risk. The auditor only gave its opinion to give additional information that it required, so it is reflected as an 'appropriate opinion' in the report,” a Balaan official said.
The firm will start minimizing its spending on marketing and focus on securing financial solvency this year. The company ended its advertisement contract with actress Kim last year. It also attracted a Series C investment of 25 billion won earlier this month to raise funds for debt repayments.