South Korea: Large retailers enter e-commerce market for designer goods

Large retailers including Hanwha and Shinsegae are keen to jump into the e-commerce market for designer brands as existing online platforms are struggling to beat a counterfeit luxury goods scandal.

Online shopping outlets for designer brands such as Mustit, Balaan and Trenbe have enjoyed a boom in Korea by offering convenience and prices lower than department stores or duty-free shops to the country’s growing number of luxury consumers.

These online platforms bring in brand-name clothes and other products from overseas designer boutiques, parallel importers and individual sellers among others, but with increasing sales volumes and counterfeit traders, it has become harder for them to vet for fake items.

In January, Naver’s online resale platform Kream announced that T-shirts of luxury fashion label Fear of God, which a consumer bought from Musinsa, Korea’s largest online fashion platform by sales, and tried to resell on Kream, turned out to be fake.

Musinsa strongly denied the claim and threatened to take legal action, but ended up apologizing and reimbursing customers twice the price they paid after Fear of God concluded that the T-shirts were indeed fake.

But as it is nearly impossible to completely block crafty counterfeit traders from finding loopholes, consumers have to either choose from paying less for luxury items at the risk of them being fake, or paying full price at department stores.

Hanwha Solutions Corp., which merged with department store operator Hanwha Galleria last year, has set up a subsidiary for e-commerce of luxury goods, and is hiring retail experts to tap into the burgeoning market.

Shinsegae Group is expanding online sales of designer goods through The online retailer recently signed official partnership deals with luxury brands, and introduced a digital warranty system using NFTs to prove that brand-name products sold on are authentic.

Lotte Shopping’s online platform Lotte On opened a beauty section that sells premium cosmetics brands, saying it will later expand online sales of high-end products to fashion and home goods.

At this precise time of crisis for online luxury sellers, affiliates of conglomerates that own nationwide networks of department stores are taking steps to get a piece of the pie.

As these large retailers directly import the products from luxury brands through their affiliated department stores, their authenticity is guaranteed, but product volumes are often limited and prices can be higher compared to parallel imports.