Money-losing SSG.COM, once the most popular online shopping mall in South Korea, is asking some of its employees to volunteer to leave the company for the first time since its inception amid intensifying competition in the country’s e-commerce market.
According to sources in the country’s retail industry on Friday, SSG.COM has launched a voluntary redundancy program for its staff who have worked for more than two years.
Employees applying for the program will receive severance pay for six to up to 24 months equivalent to their current salary and their children’s education expenses. The company will also offer anyone seeking new jobs a job search support program.
The company’s first-ever voluntary redundancy offer comes as it is in the middle of drastic business reorganization after consecutive loss-making years, except 2019, its first year as an independent organization following its spinoff from E-Mart Inc.
Last month, Shinsegae Group reshuffled SSG.COM executives, including its chief executive officer. The redundancy program is the first restructuring effort by its new CEO Choi Hoon-hak.
RESTRUCTURING KICKS OFF
SSG.COM reported 103 billion won ($75 million) in operating loss last year and 13.9 billion won loss in the first three months of this year.
Automated system in Coupang’s fulfillment center in Daegu, South Korea (Courtesy of Coupang)
Despite losses, it stayed top in the country’s online shopping industry in terms of sales but was elbowed out by Coupang Inc. last year.
Naver Corp, the country’s largest online platform, is also rapidly penetrating into the e-commerce market with the launch of Naver Commerce. Worse yet, it faces the fast ascent of Chinese rivals such as AliExpress and Temu at home.
Amid intensifying competition in the Korean online shopping industry, its smaller local rivals have already streamlined their staff to cut costs.
SK Square Co.’s e-commerce unit 11Street Co. launched a voluntary redundancy program already two times in late last year and March this year. Lotte Group’s Lotte On also let go its employees last month.
FROM GOLDEN GOOSE TO UGLY DUCKLING
SSG.COM was once fostered as one of the new growth engines by its parent Shinsegae Group.
After a spinoff from E-Mart, SSG.COM absorbed Shinsegae Department Store’s e-commerce business to become the group’s sole online platform.
Expecting synergy with SSG.COM, the Korean retail giant in 2021 spent 3.44 trillion won to acquire Gmarket, a major e-commerce marketplace based in Korea, and Auction, from eBay Korea.
But none of the efforts has paid off.
Instead, it now faces growing pressure from its financial investors, Affinity Equity Partners and BRV Capital Management, to return their investment.
The two investors poured a total of 1 trillion won in SSG.COM in 2019 and 2022 to own a 15% stake, each.
But their investment was made on the condition that the online shopping mall’s gross merchandise value surpass 5.16 trillion won by 2023, or be eligible for an initial public offering before their put option contracts expired in May this year.
After SSG.COM has failed to meet any requirement, the two investors have demanded Shinsegae to buy back their shares as agreed.
As the parent, which is the country’s retail giant, is also grappling with falling revenue, SSG.COM’s top two shareholders Shinsegae Inc. and E-Mart recently struck a new deal with the two financial investors to bring in at least one new investor by the end of this year to buy back the shares from them to ensure their exit.
The largest stakeholder E-Mart posted its first annual loss in 2023 and in March announced an early retirement program for its employees for the first time since its inception 31 years ago.
E-Mart and Shinsegae are SSG.COM’s No. 1 and 2 stakeholders, owning 45.6% and 24.4%, respectively.
By Jae-Kwang Ahn
ahnjk@hankyung.com
Sookyung Seo edited this article.
