11Street (Courtesy of SK Square)
South Korean online marketplace operators struggle to attract investors amid deteriorating profitability and the ongoing impact of the financial turmoil of domestic e-commerce platforms TMON Inc. and WeMakePrice.
Investors in 11Street Co., an e-commerce unit of Korea’s No. 2 conglomerate SK Group, have difficulties with exiting from the online shopping platform, banking industry sources said on Monday.
11 Street’s parent SK Square Co. sold an 18.18% stake in the e-commerce platform for 500 billion won ($366.1 million) to National Pension Service (NPS) and other financial investors in 2018, under conditions of a 3.5% guaranteed rate of return per year and the company’s initial public offering within five years.
The e-commerce operator has failed in its public market debut with operating losses for four straight years since 2020. Its corporate value has shrunk to around 500 billion won, about a quarter of 2 trillion won in 2019.
Despite grocery delivery platform Oasis Corp.’s intention to buy 11Street, it is unclear whether the 11Street’s financial investors would sign a deal as the liquidity crisis of TMON and WeMakePrice, Southeast Asia-based e-commerce platform Qoo10 Pte.’s Korean units, have significantly hit domestic online shopping operators’ valuations.
“Previously, increasing transaction volumes was enough to attract huge investments for online marketplaces. This will no longer work, especially amid the financial turmoil of TMON and WeMakePrice,” an industry insider said.
Retail giant Shinsegae Group’s e-commerce arm SSG.COM had conflicts with its financial investors Affinity Equity Partners and US-based BlueRun Ventures (BRV), which acquired a combined 30% stake for 1 trillion won between 2019 and 2022 under put option contracts.
As SSG.COM failed in listing in 2021 and 2023, the financial investors insisted in April to exercise their rights to request the e-commerce operator’s major stakeholders, E-Mart and Shinsegae, buy back their stakes at a premium.
In June, the financial investors agreed to sell their SSG.COM stake to a third-party investor instead of exercising the put options. If SSG.COM fails to secure a new investor, Shinsegae should buy back the stakes.
Market insiders said that many e-commerce platforms may not be able to survive if they don’t develop a differentiated competitive edge like Coupang Inc., the Korean e-commerce giant listed on the New York Stock Exchange.
Coupang has developed its ultra-fast delivery services and logistics system based on a $3 billion investment from Japan’s SoftBank Group Corp. The Korean e-commerce giant achieved an operating profit of 617.4 billion won, its first annual surplus since it was established in 2011.
By Sun A Lee
suna@hankyung.com
Jihyun Kim edited this article.
