All transactions on the luxury online platform ‘Balaan’ have been halted as credit card companies and payment gateway (PG) service providers seem to have withdrawn their services. As of now, Balaan is unable to pay the sales proceeds that were scheduled to be distributed to its sellers on the 24th. This has raised concerns about the emergence of a ‘second Tmon-Wemep {Teemeup}’ incident within the luxury distribution industry.
According to the distribution industry as of the 30th, purchases and payments have been completely blocked on Balaan since the night of the 28th. The payment window currently only displays a notice stating that no payment methods can be used. It is reported that Balaan’s average monthly transaction volume is around 30 billion won, with approximately 1,300 partner brands involved. Some industry insiders estimate that the unpaid settlement amount might reach hundreds of billions of won.
The controversy over Balaan’s unpaid settlements began on the 24th. At the time, Balaan stated that a settlement error had occurred, delaying the payout schedule, and promised to announce a new schedule by the 28th. However, as of the 30th, no significant action has been taken. In an apology letter to sellers on this day, CEO Choi Hyung-rok did not provide a specific timeline for settlement.
As of 2023, Balaan’s total equity stands at a negative 7.73 billion won, indicating complete capital erosion. For a company in such a state to survive, it needs to attract investment or continuously generate profits to cover accumulated losses. However, since its founding in 2015, Balaan has never reported a profit.
So far, Balaan is reported to have raised over 70 billion won in total investments, including a recent 7.5 billion won from Silicon Two, but as of the end of 2023, its available funds, including cash and cash equivalents, amounted to only 3.4 billion won. At one point in 2022, Balaan’s corporate value was estimated at 300 billion won, but due to recent years of sales decline and customer attrition, its valuation has plummeted to about one-tenth of that, approximately 30 billion won.
Last August, in a financial health report of ten major e-commerce platforms triggered by the Tmon-Wemep incident, Balaan’s warning signs were noted. Balaan’s cash flow from operating activities has been negative for the past three years, during which it has incurred losses throughout its operations. The amount Balaan owes to sellers increased from 8.4 billion won in 2022 to 10.7 billion won in 2023, while its sales fell from 89.1 billion won to 39.2 billion won. Accounting expert Park Dong-heum commented that the increase in amounts owed against decreasing sales could imply that payment cycles are lengthening.
This ‘Balaan incident’ has also cast a shadow over the financial health of other competing luxury platforms like Trenbe and Mustit. Due to the economic downturn and declining demand for luxury goods, these companies are also facing difficulties. As of 2023, Mustit’s operating loss stands at 7.9 billion won, and Trenbe’s at 3.2 billion won. In response to the Balaan incident, Mustit adjusted its settlement cycle to prevent sellers from leaving and publicly disclosed its financial statements from the previous year through partner announcements.