Korean operations of Singaporean e-commerce firm Qoo10 face investigation over delays in payments to sellers

South Korea’s e-commerce market is one of the world’s largest, but it’s also proving to be shady. On Thursday, South Korea’s Fair Trade Commission announced it had launched an investigation into two major South Korean e-commerce platforms owned by Qoo10 — Ticketmonster (TMON) and WeMakePrice — for failing to pay sellers.

South Korean officials said about 60,000 merchants collectively owe $123 million (KRW 170 billion). Both companies are struggling with cash flow, so to shore up operations, they have also stopped issuing refunds to consumers. Meanwhile, South Korean banks have also temporarily halted lending services to TMON and WeMakePrice due to payment delays, according to local media reports.

The situation highlights the delicate and competitive market situation in the country. Naver, Coupang and SSG are currently the largest e-commerce players in the country, but their combined market share was just 45% in 2022. In an industry where profitability is heavily dependent on economies of scale, there are many others vying for even smaller market shares, with many struggling and suffering losses.

The ecosystem effect has been swift for Qoo10. InterPark Triple, which sells travel products on the platforms, said it would cease doing so if it did not receive payment by today, July 25. Yanolja, parent company of InterPark Triple, said in an emailed statement that it had already ceased sales on both platforms.

Qoo10, TMON, and WeMakePrice did not immediately respond to TechCrunch’s request for comment.

Local media outlets have been pointing the finger at Qoo10 — specifically, the string of acquisitions its parent company has made over the past few years of often struggling e-commerce platforms. In addition to acquiring WeMakePrice in April 2023 and TMON in August 2022, it acquired Korean online shopping platform InterPark Commerce (not the same as InterPark Triple) in March 2023 and Hong Kong-based Korchina Logistics via its logistics unit Qxpress. Earlier this year, Qoo10 also acquired Wish, a U.S. e-commerce platform, and AK Mall, an e-commerce company in South Korea.

These acquisitions were part of Qoo10’s expansion strategy to strengthen its market presence and prepare for its initial public offering on the US Nasdaq. However, they also brought with them financial burdens and operational challenges, leading to the current liquidity crisis.

Founded in 2010, Qoo10 is a Singapore-based joint venture between American e-commerce company eBay and GMarket founder Young Bae Ku, a seasoned South Korean e-commerce tycoon. It is now backed by KKR, among others.

Ku founded Gmarket in 2000 in South Korea and expanded to Japan in 2007 and Singapore in 2008. After Ku sold Gmarket’s South Korean unit to eBay in 2009, Gmarket changed its name to Qoo10 in 2012 and entered other Asian markets, including Singapore, Japan, Indonesia, Malaysia, China, Hong Kong, and India. (GMarket has been listed in the U.S. through American Depositary Shares since 2006.) In 2018, eBay acquired Giosis’s operations, including Qoo10’s Japanese unit, for $573 million.