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| Balaan posted an apology on its official website following the leak of customers' personal data on March 17. Courtesy of Balaan |
By Kim Jae-heun
Balaan, Trenbe, Must It and other online luxury shopping malls had flourished over the past two years during the raging COVID-19 pandemic on the back of so-called "revenge spending" by consumers who spent money on luxury goods since they were unable to travel abroad.
However, as soon as the country showed significant signs of recovery from the pandemic and the government lifted travel bans, local luxury shopping firms saw their sales plunge.
The platforms spent a tremendous amount of money on marketing in 2020 and 2021 to stay ahead of their rivals amid intensifying competition. They hired top actors like Joo Ji-hoon, Kim Hye-soo and Kim Hee-ae for their commercials to raise brand awareness and attract new customers. This led spending at all three luxury shopping firms to surpass 300 billion won ($214.5 million) last year. In particular, Balaan's gross merchandise volume in 2021 surged 51 percent year-on-year to 315 billion won.
However, controversies like selling fake luxury goods, leaking customers' personal data and requesting excessive refund fees have turned many customers off. In addition, the U.S. Federal Reserve raising its target interest rate by 75 basis points three times in a row affected local venture capital and private equity funds to withdraw their plans to invest in local luxury platforms.
Balaan is said to have been hit the hardest by such changes, according to industry analysts. The company has been trying to attract "Series C" funding since January. Balaan planned to raise about 100 billion won through investments.
However, after it deceived customers about the prices of its products, while some of the items sold were reportedly revealed to have been imitations, Balaan saw 120,000 users close their accounts.
Its corporate value also decreased from around 800 billion won to 500 billion won.
"We planned to go public after successfully attracting Series C investments, but it did not work out well. We are also currently facing continuous operating losses and we have decided to decrease marketing expenses as well," a Balaan official said.
"A number of unfavorable factors have tarnished the brand images of luxury shopping firms and many users have left their platforms," a source at a local luxury firm said. "The number of users is connected directly to their business performance and this makes investors hesitant to spend money on luxury shopping platforms here."
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