South Korea To Support Businesses Amidst E-Commerce Crisis
South Korean government to support small-business vendors on Qoo10-owned e-commerce platforms amidst payment chaos
South Korea’s government is to provide $400 million (£311m) in financal support to small businesses who are vendors on the Tmon and WeMakePrice e-commerce platforms as the two companies suffer a liquidity crisis.
The companies, both owned by Singapore-based Qoo10, have failed to make payments to vendors since early July for purchases made on their platforms since May, which Qoo10 said was due to a glitch in its payment system.
As a result unpaid sellers have left the platforms, while customers who have purchased products and services are facing difficulties obtaining refunds.
Both platforms on Monday filed for corporate rehabilitation in the Seoul Bankruptcy Court due to the issue, news agency Yonhap reported.
Liquidity crunch
Previous remedy discussions have focused on customers, but financial authorities now say they will also provide low-interest loans to affected small businesses as well as extensions on repayments of existing loans and on tax payments.
The government estimates missed payments have grown to 210bn won ($152m, £118m).
“The government will utilise all available resources to minimise the damage,” said vice finance minister Kim Beom-seok at a press conference, Reuters reported.
South Korea’s prosecutor general on Monday ordered a designated team to investigate the case, Yonhap reported.
Ku Young-bae, the South Korean national who founded Qoo10 in Singapore in 2010, apologised on Monday and said he would secure emergency liquidity by drawing on overseas funds or disposing of assets or using them as collateral.
“I will sell or use my entire stake in Qoo10, which is most of my assets, as collateral and use it to resolve this situation,” he said in a statement.
Small business crisis
Qoo10 said damage to customers was about 50bn won but did not give an estimate for vendors.
Vendors said on Monday that more than two months of revenues were in limbo due to South Korean e-commerce firms’ practice of delaying settlements for months, which could mean layoffs or bankruptcy for some small vendors.
Vendors said Qoo10’s remedies of delaying interest payments and reducing sales fees were inadqueate.
Qoo10 said over the weekend it planned to secure about $50m through US affiliate Wish, an e-commerce platform it acquired for 230bn won in February, but authorities reportedly found the sum inadequate to resolve the situation.
