[INTERVIEW] 'New order takes root in fashion e-commerce industry'

Seo Eun-hee, chief of marketing at Musinsa, Korea's top fashion e-commerce platform, poses during a recent interview with The Korea Times at its newly-built studio in Seongsu-dong, known as Seoul's Brooklyn. Korea Times photo by Choi Won-suk

Korea's top fashion unicorn dismisses concerns of bubble in sector

By Kim Yoo-chul

The COVID-19 pandemic has dealt a huge blow to the fashion industry, causing a lot of traditional merchants to be unsure of how to maintain their bottom lines as consumers shift in droves to e-commerce platforms.

Fashion retailers that managed to actively implement e-commerce strategies have benefited significantly from the pandemic. Plus, new and existing fashion e-commerce brands have been hugely successful, while the pandemic ended up gradually widening the gap between digitally-driven apps and platforms and offline laggards.

Fashion industry experts have no doubt that the business of fashion is on track to seeing a new order take root, because the pandemic has changed how consumers interact with brands and redesign their shopping experience.

From an investor's standpoint, the pandemic has led to the rise of "unicorn" fashion e-commerce companies and an increase in their valuations. Startup companies with a billion-dollar valuation are labelled as unicorns as they were once considered as rare creatures.

Some industry analysts warned investors to be wary of a bubble forming in the industry that could burst at any time.

But a senior executive at the country's top fashion e-commerce platform operator dismissed such concerns.

"Because a new order is prevailing in the industry given increased investor focus on sustainability-oriented considerations during and after the pandemic, with particular demand for growth potential, a few rational players will thrive even more," Seo Eun-hee, the marketing chief of Musinsa, said in a recent interview with The Korea Times at the fashion e-commerce unicorn's new studio in Seongsu-dong, also known as Seoul's Brooklyn.

A concept design of Musinsa's Web application is seen in this file photo. Korea Times file

"I would say the fashion e-commerce industry is experiencing the 'valley of death.' Because Musinsa is the only unicorn company in the fashion e-commerce industry in Korea that is reporting profits every year since the start of business operations, investors will focus more on potential returns and I'm sure Musinsa's existing and new business models are good enough to appeal to investors," Seo said.

The "valley of death" is a term widely used in the startup industry, referring to the period of negative cash-flow in the early stages of a venture company before their new product or service generates revenues. More than 80 percent of new ventures that fail to win investors' support end up failing within the first three years. That's because large investors prefer to park their money in business models that are proven and ready to scale, rather than R&D and development efforts.

Founded in 2012, Musinsa operates an online shopping mall called "Musinsa store," a fashion magazine "Musinsa magazine," and offline store "Musinsa store." As of May this year, Musinsa's is valued at around 5 trillion won, up from 2.5 trillion won just a few years ago, according to officials in the local investment banking industry.

The country's top fashion e-commerce platform reached 2.3 trillion won worth of monetary transactions by last year, up 90 percent year-on-year. Revenue in 2021 reached 466.7 billion won, up 41 percent year-on-year, while the company reported 54.2 billion won in operating profit, up 19 percent, it said in a statement to The Korea Times.

It has over 10 million users and so far, the company has attracted 320 billion won in investments, including 130 billion won from IMM private equity. Its outstanding growth trajectory stems from its offering of a wider selection of foreign casual brands that were quite tough to find in Korea along with limited-edition items.

No change in prime targets, phased global expansion strategy

Regarding its brand positioning statement, which could lead to market differentiation from competitors, the marketing chief Seo said Musinsa is attempting to rise as a multi-platform that could include fashion- and culture-centric features.

Seo Eun-hee, chief of marketing at Musinsa, Korea's top fashion e-commerce platform, responds to questions during a recent interview at its studio in Seongsu-dong, Seoul. Korea Times photo by Choi Won-suk

"Musinsa started with street style, the style of which is a really viral, addictive and instant; however, the evolution of street style is asking us to avoid decoupling between mainstream fashion considerations and fashion style based on individualism," according to the executive, adding its recent release of short YouTube ad clips that show its ability for content creation based on the company's persona is aimed at helping a group of youth find ways to gain social validation efficiently as creative endeavors.

When asked about the specifics of its initial public offerings (IPO) plan, the plan of which could materialize sometime next year, according to stock market analysts, the marketing chief declined to elaborate.

But she said Musinsa is specifically eyeing Japan, countries in South Asia and Southeast Asia for increased market penetration. Key rationale behind its focus on these markets is that K-Pop and Korean entertainment including music, film and TV programs are widely being circulated, a huge plus factor in terms of appealing target consumers with Korean street style clothing inventories.

The continued popularity of K-culture is contributing to reshaping consumer behavior in Asia and the popularity of Korean content also means that language is no longer a barrier for consumers watching preferred foreign media content. The executive went on to say that K-content is touching "emotional demands" of consumers in Asia through similar cultural context and by being "emotionally expressive."

"We are reviewing the validity of overseas business expansion plans. Yes, given the intensity of K-culture craze among the youth, the prime target in terms of Musinsa's age group, it's sensible for us to advance Southeast and South Asia and to further expand footsteps in Japan, possibly followed by the United States and Europe," the executive said, adding it plans to sponsor various events showcasing Korean culture including K-Pop in its target markets. Musinsa earlier scrapped its plan to acquire controlling stakes in its domestic rival, which focuses on Japanese shoppers because the two failed to agree on key conditions regarding the deal.

"We have a subsidiary in Japan. There are influencer groups according to regions and cities. We are trying to find common ground with these focus groups by keeping contacts with 'hot celebrities' in Instagram," she said. Mardi Mercredi, a domestic fashion brand, reported 1 billion won or some 100 million yen (Japanese currency) worth of revenue in six months since its market entry in Japan. Musinsa helped it set up an official online store with the availability of Japanese. It launched pop-up store campaigns in major Japanese cities.

The executive said Musinsa is hoping to broaden business spectrum from fashion-centric to lifestyle-centric and stressed chances are high as Musinsa is already a "vertical brand," which also has core targets both in markets and age groups. Based on brand recognition it earned from online sales, it wants to deepen its relationship with customers and personalize customer engagement by opening up physical stores, according to Seo.

"We are planning to set up pop-up stores in Jeju, September 1 and as a way to show off healthy relationship with partners, we could be able to manage joint marketing campaigns as a fleamarket style."