Massive payment delays at online retailer Qoo10 infuriate Korean customers, prompting the government to offer 560 billion won to bail it out
By Yonhap
South Korean e-commerce platforms TMON and WeMakePrice have experienced massive payment delays, affecting consumers and small businesses. It has been reported that the South Korean government plans to provide 560 billion won (approximately 590 million yen) in financial assistance to address this issue.
Cash-strapped Tmon, WeMakePrice file for court receivership
South Korea to support vendors hit by Qoo10 payment delays, founder pledges compensation | Reuters
https://www.reuters.com/business/retail-consumer/south-korea-prepares-support-e-commerce-vendors-hit-by-payment-delays-2024-07-29/
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https://www.kedglobal.com/e-commerce/newsView/ked202407290012
The problems at South Korean online shopping sites TMON and WeMakePrice, both operated by Singapore-based e-commerce company Qoo10 , are reportedly due to delays in payments from the online shopping sites to sellers who handle products.
Due to non-payment from TMON and WeMakePrice, the sellers refused to deliver the products. In addition, the payment processors of both sites refused to cancel the credit card payments, so users who purchased products with credit cards were unable to receive the products or cancel their orders.
Delayed payments for 'Timon' and 'Wemep' spreads damage l KBS WORLD English
https://world.kbs.co.kr/service/news_view.htm?lang=j&Seq_Code=88231
TMON and WeMakePrice then filed for corporate reorganization procedures at the Seoul Reorganization Court, which has jurisdiction over corporate bankruptcies, on July 29, 2024. This is a process by which financially struggling companies reorganize their debts and operations, but as creditors' assets are temporarily frozen, sellers will not be able to receive payments for the time being.
On the other hand, if creditors' approval is not obtained during the reform process, there is a risk of bankruptcy, which would make it difficult for distributors to recover their funds. The court is expected to review the applications of the two companies and make a decision on whether to approve them within a week of the application.
According to government estimates released on the 29th, the total debt of the two companies to distributors is 213.4 billion won (US$230 million), broken down as follows: TMON owes 128 billion won (US$130 million) and WeMakePrice owes 85.4 billion won (US$90 million). These figures are as of the 25th, and the amount is expected to increase daily.
To help small and medium-sized businesses affected by late payments, the South Korean government has launched a support package of 560 billion won, including low-interest loans and deferrals on repayment of existing loans and tax payments.
'WeMakePrice and TMON must take responsibility for their payment defaults, but the government will provide emergency financial support to resolve this incident and protect consumers,' Kim Beom-seok, first vice minister of the Ministry of Strategy and Finance, said at a press conference. 'The government will use all available resources to minimize the damage.'
TMON and WeMakePrice began to delay payments to their trading partners in July 2024, and their parent company, Qoo10, initially attributed this to a malfunction in the payment system.
But Qoo10 has been financially strained by aggressive merger and acquisition deals, and TMON and WeMakePrice each have huge unpaid debts to hundreds of merchants, according to people familiar with the matter. And some vendors, notably travel service providers such as SoftBank-backed hotel booking platform Yanolja, have told consumers that orders placed through Qoo10 are invalid or have terminated business with Qoo10 affiliates.
As a result, TMON and WeMakePrice offices were inundated with requests for refunds, and long queues of irate customers formed.
Qoo10 founder and CEO Koo Yong-bae has apologized for the issue, saying in a statement, 'I intend to sell or use as collateral all of my Qoo10 shares, which account for the majority of my assets, to help resolve this situation.'
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