[비즈한국] Specialized online malls that boasted over 20 years of history are collapsing. This is due to a significant cooling in consumer sentiment caused by the economic downturn, compounded by the impact of Chinese e-commerce giants like AliExpress and Temu. Experts predict that the sorting of "wheat from the chaff" among the vertical commerce platforms that sprouted up over the past few years is now in full swing.
CJ ENM also declares business exit, string of closures continues for online select shops
The kidult select shop ‘Funshop’ will cease operations in March. Opened in 2002, Funshop was targeted at the 3040 generation of "kidults"—adults who do not hesitate to spend money on their hobbies. By primarily selling games and various hobby-related goods, male customers accounted for more than 70% of its total user base.
Funshop is operated by Brandworks Korea, a subsidiary of CJ ENM. In 2017, CJ O Shopping (CJ ENM's commerce division) acquired a 70% stake in Artworkskorea, the operator of Funshop, to strengthen its media commerce business. In 2022, it bought the remaining 30% to incorporate it as a wholly-owned subsidiary and changed the company name to Brandworks Korea.
As news of Funshop’s closure broke, voices of regret emerged from the industry. An industry official said, "Funshop was popular among enthusiasts because of its strong product curation. After being acquired by CJ ENM, critics felt its product curation quality declined compared to the past, so it’s a shame to see it close." Another official added, "Funshop didn't show the same unique product curation as it once did. It even reached a point where customers pointed out that it was selling products similar to those on AliExpress."
CJ ENM explained that the closure of Funshop is part of the business reorganization of its subsidiary, Brandworks Korea. A CJ ENM representative stated, "Brandworks Korea plans to strengthen its brand business starting this year. We intend to focus on business efficiency by diversifying sales channels for core brands like Rockport, Odense, and Brooks Brothers. In accordance with this strategy to strengthen the brand business, we have decided to withdraw the online platform 'Funshop,' which was operated by Artworks Korea, the predecessor of Brandworks Korea."
There is also a sense that CJ ENM judged the growth potential of Funshop to be limited. The aforementioned official added, "Because Funshop targeted men in their 30s and 40s, there was an aspect of it being a platform that was perhaps too niche."
Specialized malls that sprouted up now face a "sorting of wheat from chaff"
Since last year, declarations of service closures by online select shops have continued. In June of last year, the stationery and lifestyle online mall Babosarang ceased operations, and in August, the home appliance and furniture select shop Allets closed its doors. The design product specialty mall 1300K also ceased operations after running through September. NHN Weto, a subsidiary of NHN181710, which operated 1300K, also shuttered its services for 1200m, a furniture and lifestyle mall, the select shop SoKooB, and Weto MRO along with the closure of 1300K.
Industry experts analyze that as consumer sentiment has shrunk due to the recession, the entry of "C-commerce" (Chinese e-commerce) into the domestic market has heightened the sense of crisis for specialized malls. Lee Jong-woo, a professor of business administration at Ajou University, explained, "When the economy becomes unstable, people first cut back on purchases of non-essential items. As a result, consumption of manufactured goods often bought based on hobbies or personal taste has recently dropped significantly. In this situation, the impact is bound to be greater as C-commerce expands its market influence."
Many online select shops had previously generated revenue by importing and selling Chinese manufactured goods. However, since C-commerce entered the domestic market, the number of consumers purchasing products directly through Chinese e-commerce platforms like AliExpress and Temu has increased. One consumer said, "When I find a product I like on a shopping mall, I don't buy it immediately; I check if the same product is on AliExpress. Most of the time, the exact same product is there, and the price on AliExpress is much cheaper."
Seo Yong-gu, a professor at Sookmyung Women's University's School of Business, analyzed, "Along with the decline of offline retail, the polarization of the e-commerce market is becoming clear. Beyond large e-commerce platforms like Coupang and Naver, small and medium-sized players are falling behind in market competition and struggling to catch up with industry leaders. While it was possible to operate in niche markets in the past, it looks like it will become increasingly difficult in the future."
Among experts, there is also an expectation that the "sorting of wheat from chaff" regarding the vertical commerce platforms that have been launched one after another by the e-commerce industry over the past few years is now beginning in earnest. Unlike comprehensive malls, vertical commerce platforms are shopping malls that specialize in selling products from specific categories, such as fashion, living, and food. The domestic e-commerce market grew rapidly following the COVID-19 pandemic, and in that process, many specialized malls emerged.
Professor Lee Jong-woo pointed out, "As the growth trend of the e-commerce market has stalled, it has now become a battle of product competitiveness and content. Customers only gather where there are differentiated products or content that cannot be found elsewhere. It is becoming difficult for places that only collect similar products that can be found anywhere else to survive. A time has come where more sophisticated merchandising (product planning) is required. More investment has become necessary to survive."
There are also predictions that movements by specialized malls to leave the domestic market and expand overseas for survival will increase. Professor Seo Yong-gu forecasted, "It seems it will become difficult for e-commerce companies that only target the domestic market to survive because the economically active population in the domestic market is shrinking day by day. In this downsizing market, the e-commerce industry will likely implement strategies to gradually target the global market."