Online shopping malls find homes for goods dumped by the finicky

Park Sang-jin, a college student, clicked on the returned items category that he found at an online auction agency, Internet Auction Co. (www.auction.co.kr). Returned color printers from several online shopping malls were being sold 30 percent to 40 percent cheaper on the site. Mr. Park found and purchased the item he was looking for. It cost more than a similar second-hand item, but a lot less than a new one. “I bought a returned laptop in the United States a year ago,” said Mr. Park. “I am happy that the online market for returned goods, which is growing popular in the U.S., has finally hit Korea. “I like returned items because they still have a warranty for a certain period of time, unlike second-hand items. They are also as good as brand new items.” With the rapid growth of online markets, including television home shopping channels and Internet shopping malls, the number of returned goods has been increasing sharply. Hence, the number of companies selling returned items through the Internet is rising as well. The online shopping malls selling returned goods often are a beacon for bargain-hunters looking for cheap, quality products. Items which used to be abandoned or passed on to other traders on the street, meanwhile, are given another chance to be sold as returned goods. The trend is gaining in popularity in Korea, as companies that had previously encountered difficulties in dealing with returned goods now have other distribution channels, and customers can buy good-quality products cheaper than usual. The rate of returned goods is 10 percent to 30 percent of the total sales of television home shopping channels, online shopping malls and catalogue retailers. The value of the market for returned goods is estimated at two trillion won ($1.69 billion), which is about 20 percent of the estimated total online market in Korea, valued at 10 trillion won. However, the image of returned goods has been somewhat negative until now, as most people have interpreted them as being defective or damaged. The idea is changing, though, thanks to the increasing number of consumers who purchase items from online malls, television home shopping channels and catalogues without glancing over the products. Sometimes these items are returned because they are defective, but most of the time it is simply because people change their minds over the color or design. According to online shopping malls and television home shopping companies, 50 percent of returned goods are handed back in their original packaging after the customers changed their minds; 30 percent are returned after inspecting the items; and 20 percent are returned after using them for a short period. “At the moment, the return rate due to defects is only about 1 percent,” said an LG Home Shopping official. At present, the market for returned goods has leveled out in developed countries, such as the United States. Not only online shopping malls but also large retail chains, including Wal-Mart Inc., have opened a separate area for returned goods, attracting increasing numbers of bargain-hunters who shop only for such items. Returned goods, which once caused headaches for many companies, are now welcome online. Recently, the Korean word for returned goods, banpum, has appeared on popular Internet auction sites. The word has ranked in the first for the last week on the list of popular search items at Internet Auction. Auction bids are becoming more competitive, as well. On average, about 45 people bid on each returned item being auctioned. An online shopping mall, Uniz Co. (www.uniz.co.kr), has been selling returned goods since December 2001. Recently, the number of users on its site has increased to the point where the company’s Web server has repeatedly crashed. Uniz now plans to transform itself into a shopping mall specializing in returned goods only. “We used to sell truckloads of returned goods on the street, for example printers,” said Park Jong-gwan, a marketing department employee at Uniz. “However, as we can charge 70 percent to 80 percent of the market price for returned goods online, our revenues have been boosted dramatically recently.” The company said it used to make 30 million won per month in 2001, but that sales have been more than 20 million won per day lately. Returned goods make up 85 percent of its total sales. Vanpumdotcom (www.vanpum.com), an online shopping mall specializing in returned goods, started business last April. Since then it has attracted more than 30,000 members in three months. The company sells 2,000-3,000 types of returned goods at prices that range from 10 percent to 70 percent cheaper than retail. At any one time, up to 3,000 members have reservations on specific returned items. “I became interested in the market for returned goods while seriously worrying about how to deal with these items at the online electronics store,” said Lee Won-yong, president of Egate Communications Group, which operates the site. At present, agencies dealing in returned goods include online shopping malls such as Skdtod Corp., (www.skdtod.com), TG Land Co. (www.tgland.com), and Tradepot Inc. (www.tradepot.com). HalfClub (www.halfclub.com), an online trader of stored goods, has also recently started selling returned items. The growing interest has pumped up sales of returned goods by online shopping malls, and the phenomenon is still expanding. by Kim Chang-gyu