Dongdaemun: An old market learns some new tricks
At 11:30 p.m. on a cold December night, Hwang Jung-ho, 26, started work. He swiftly moved through the corridors of KwangHee Shopping Mall, one of Dongdaemun’s largest wholesale fashion markets. It was close to midnight, but the fashion market was busy.
Hwang got off the escalator on the third floor and ran to a clothing store.
“Hi, I’m here for Linkshops,” he called out. “[We have orders for] five ‘vogue knit dresses’ and two ‘stripe blouses.’ Make it quick please.”
The employee pulled out a small bag with “Linkshops” written on the tag and handed it over.
Hwang visited a number of other shops, collecting small plastic bags as he went. When he had about 20 small bags he threw them all into a large bag, called a daebong, a Korean portmanteau meaning big bag. Hwang’s daebong is so big that even he could fit inside.
As many as 20 daebongs are filled on just one floor of KwangHee Shopping Mall every night. Each one weighs well over 15 kilograms, but Hwang says he often carries as many as four at the same time.
“I can use both hands, my wrists, shoulders and even thumbs,” he said. “The trick to lifting them easily is pushing with your knee before swinging them up to your shoulder.”
Hwang runs around the narrow corridors with his huge bags, rushing up and down the stairs in between floors instead of using the crowded escalators. He says this is the only way he has time to pick up all the orders received for the night.
When Hwang’s bags are full he loads the clothes onto trucks ready to be distributed around the country in the morning.
By 1 a.m. the corridors are absolutely packed with shoppers, stuffed vinyl bags of all sizes and men like Hwang, running the gauntlet of Dongdaemun’s wholesale shopping center.
Hwang is known as a sa-ib samchon, which literally means a personal purchase uncle in Korean. Hwang and his colleagues are the backbone of Dongdaemun’s wholesale business. They pick up clothes that have been ordered by retail stores around the country, pay on their behalf and then load the goods onto trucks to be delivered in the morning.
But Hwang has one trick that sets him apart from the rest of the sa-ib samchon. While his colleagues scurry around the market desperately trying to keep track of hand-written notes detailing their orders, Hwang keeps track of his business through an app.
Developed by local start-up Linkshops, the app shows Hwang and his team’s assignments for that night, detailing how many units of each item he needs to pick up, what store they come from and what building they’re in. Linkshops also takes care of the money, so Hwang no longer has to act as a financial middle-man for retailers, shaving valuable seconds off each collection.
“The app shows which orders we have to pick up that day and where they are - the store and the building,” he said. “Others cross off product names written on paper with a pen, but we check them off on our app so our entire team shares which orders are left.”
As well as Korean buyers, Dongdaemun’s markets are also popular with foreigners - many of them from neighboring Asian countries.
“Around 90 percent of visitors are foreigners,” said one merchant who owns a wholesale store in apM Place, a popular Dongdaemun market building.
“Chinese clients are the most frequent visitors - we had one night last year when a single Chinese client placed an order for thousands of knit dresses in multiple colors,” he said. “Korean retailers usually buy three to four a day.”
The reason there is such a big gap between foreign buyers and domestic customers is because the former fly into the country specifically to visit Dongdaemun and place large orders. Korean retailers can visit the stores any time and place smaller orders when items are required.
“I come once a month and stay for three days when I’m here,” said one Taiwanese woman in her late 20s, who operates a boutique in Taipei. “But I don’t go to Japan or China. Dongdaemun is convenient for me in that it has stores of any style I want in one place.”
Dongdaemun’s wholesale fashion stores make their own clothes following their own style, regardless of where their shop is located. Smaller stores will often specialize in manufacturing a particular style of clothes. For example, one store in the The OT shopping mall had a wide array of brightly colored sweatshirts with bold lettering, while just around the corner another shop exclusively sold blue jeans in various styles, colors and fits.
Another couple in their late 30s traveled from Taiwan to buy clothes for their store in Kaohsiung. “Dongdaemun has good quality clothes, not to mention the cycle is so fast here - new clothes come out every week,” the husband said. “It’s not hard to find goods in the Chinese market that are copied from clothes bought here.”
At 1 a.m., the Taiwanese couple was already dragging around two huge vinyl bags stuffed with clothes.
The power of Dongdaemun-made clothes is also visible in the popularity of several e-commerce sites that have become global brands in their own right. The shopping website Stylenanda is one example.
The company currently operates nearly 170 brick-and-mortar stores across Asia including in China, Japan, Hong Kong and Thailand and has more than 1.1 million Instagram followers from all over the world. Like most Korean shopping websites, the business started in 2005 with clothes from Dongdaemun’s wholesale market.
According to Cafe24, the main service provider of online e-commerce platforms in Korea, the number of shopping websites in the country that conduct business overseas doubled in the last three years to 67,490 last year from 29,689 in 2014. The value of online orders for clothes heading overseas also doubled to 10.8 trillion won ($10.15 billion) last year as of November, from 5.6 trillion won in 2012.
“Dongdaemun’s competence lies in its speed, above-average design and the unbelievably cheap price compared to its overall quality,” said Daniel Park, CEO and trend lab director at research firm Interfashion Planning.
“It’s almost impossible to see all three factors combined at once in other markets. The existence of high-quality fabric and parts manufacturers are also big strengths that Dongdaemun has.”
One of a kind
There are only five wholesale fashion markets in the world that have a full-chain cluster of manufacturing factories and wholesale sellers - Korea, the United States, China, Brazil and India. Among those five, Dongdaemun is the only one where the wholesale market runs until dawn. This means that clothes made one afternoon can hit shelves the very next morning. Considering there are parts of Dongdaemun that also have retail markets available for ordinary consumers during the day, Dongdaemun really does never sleep.
Located in the northeast of central Seoul along the Cheonggye Stream, Dongdaemun market has served as a shopping center for Seoul citizens since the early 1900s during the Joseon Dynasty (1392-1910). It was in the 1960s when the market started to develop into its current form, as sewing factories opened in the area in the post-Korean war era. Following the success of the Pyeonghwa Market, more buildings were established in the area to reach today’s total of 27.
In the 1970s and 1980s, fabric made here was Korea’s leading export product. In the 2000s, the wholesale market fed the growth of Korea’s online shopping industry.
The 27 shopping centers in Dongdaemun are home to more than 20,000 wholesalers. Each store is its own brand - the store owners design the clothes and place the order at one of the 20,000 or so small-sized manufacturing factories within 5 kilometers (3.1 miles) of Dongdaemun.
This concentrated cluster, the coexistence of wholesalers and manufacturers in such a small area, is what makes it possible for a piece of clothing to go from being just an idea in a designers head to on a rack in a retailer in just a few days.
New products appear every week. Wholesalers are driven by the fierce competition that comes from having such a small area packed with similar businesses. Another contributor is the adjacency of the manufacturing facilities.
Wholesalers never start selling a new product in a large quantity - they start small at first, see how the market responds, and decide whether they will make more or change the design. This is only possible because the factories are just up the street and they are willing to manufacture clothes in small quantities.
The dynamics and speed of Dongdaemun still makes it an attractive fashion market after nearly four decades of doing business in an industry where trends change in the blink of an eye. However, doing business in Dongdaemun’s wholesale market is extremely difficult for newcomers to the industry.
The main reason is because Dongdaemun has developed an exclusive business culture of its own: Sales networks are based on relations and familiarity, receipts and order sheets are often written by hand and payments given in cash. One Dongdaemun wholesaler even said the only “digital” change he saw in the market for a long time was the use of an electronic cash machine.
Dongdaemun wholesalers originally favored the low-tech approach because the lack of a paper trail made it easy to evade paying taxes. As decades passed and more and more wholesalers got on the right side of the National Tax Service, paper notes and cash payments were so deeply rooted in the culture of the market that nobody was really willing to change things.
But this outdated way of operating stores and managing stock also created a handful of problems for both wholesalers and their customers.
No paper trail meant no record of stock movements. If a delivery went awry, there were no documents to confirm the details. Retailers had to wait until late at night to call wholesalers and chase the products that weren’t delivered that morning. Sa-ib samchons occasionally ran away with retailers’ money. All the handwritten receipts and order sheets often made it hard to keep track of sales and costs, and made a trip to the accountants into an absolute nightmare.
But there are signs that digitalization is slowly reaching the obstinate market. Local start-ups offering online B2B (business-to-business) services have started to spring up and have been surprisingly successful at persuading the old-fashioned merchants to use their service.
This reflects a more open-minded attitude towards online tools than before. Over the last decade, Dongdaemun merchants slowly became more accustomed to electronic cash machines and issuing receipts due to the rise of a tech-savvy generation of shoppers and retailers. Shopping websites in Korea were a minority in the early 2000s, but they have grown with remarkable speed, big enough to threaten the sales of major brick-and-mortar shops like department stores, once considered invincible.
The online transaction volume for fashion goods between January and November last year reached 10.8 trillion won, according to data from Statistics Korea. This is even higher than the entire annual figure for 2016, at 10.2 trillion won, and nearly double compared to five years ago, at 5.6 trillion won.
Online fashion retailers use digital tools to receive consumer orders, keep the books and manage stock. Unlike earlier generations that paid cash and conducted transactions with handwritten slips of paper, e-commerce platforms insist Dongdaemun wholesalers issue digital bills and documents to prove transactions.
“The atmosphere is a little different among Dongdaemun wholesalers nowadays,” said Oh Young-ji, chief operating executive at Linkshops. “Hugely successful e-commerce sites like Stylenanda or Imvely completely disrupted the fashion industry and now they’re clearly affecting the sales of fashion market wholesalers. Wholesalers now acknowledge that the internet is a wave that can’t be reversed.”
Established in 2012, Linkshops offers an online platform that links wholesalers and retail shop owners. The company operates an e-commerce site where retailers can buy products from Dongdaemun’s wholesalers and have them delivered to their brick-and-mortar stores.
Like any consumer-targeted e-commerce company, payments can be made online and every step - from placing orders to seeing the progress of a delivery - is recorded so that users can check at any time on Linkshops’ smartphone app and website.
At night, the retailers’ orders are picked up by Linkshops’ sa-ib samchon team including Hwang. They check off the goods they collect in Linkshops mobile app. Records of orders that failed to be picked up are also inputted on the app.
The most frequent reason products aren’t picked up is because they were sold out and the factory needed more time to make more. Linkshops’ sa-ib samchons also write in the date when the product will become available.
There have been prior attempts from government offices and conglomerates to offer digital services to Dongdaemun market merchants, but none managed to break into the exclusive community.
Considering the struggle, Linkshops has done well so far - the number of wholesalers they work with reached 6,000 last year, around 30 percent of all wholesalers in the market and a big jump from 2,000 in 2016. Oh said the achievement was possible through recruiting people who actually had experience and networks inside the market. They account for half of Linkshops’ 65 employees.
Among the company’s wholesale clients is a store located in DongPyeongWha Fashion Town. It is one of only two stores on the corridor that open at night - the rest open in the morning.
“Unlike other shopping centers, this isn’t a regular shopping place for retailers, so services like Linkshops are our only source to pull in new consumers,” said the store’s staff. “We sometimes see new customers visiting our store after learning about it in the app.”
Around 20 percent of retailers using Linkshops are from overseas. This year, the company plans to expand its presence in Taiwan, Hong Kong and Macao. Their ultimate goal is to link wholesalers and retailers across all five fashion wholesale markets worldwide.
A Korean start-up established last year, Swatch On, offers a B2B business for Dongdaemun’s fabric market which has more than 3,000 manufacturers in five buildings and 2 billion types of fabric.
The company’s online website has a vast database of fabric swatches from Dongdaemun - a photo, detailed description of the material, thickness and so on, and lastly a video of the sample being stretched and squeezed. Dongdaemun’s fabric market offers a lot of these swatches for free.
Users can pick which swatches they would like to see in person and purchase a “Swatch Box” - a full set of fabric samples delivered to them.
Since the company started business in September, it has received Swatch Box orders from 900 brands across 80 countries. Seventy percent of those who purchased the box ordered fabric from Dongdaemun.
Notably, almost 40 percent of the Swatch Box orders are from leading countries in the fashion industry including France, Spain, the U.K. and Italy. Oh Min-ji, one of the company’s co-founders, tested the business on her own in 2016 and saw some of the fabric she sold appear at New York Fashion Week and in Vogue magazine.
“The strength of Dongdaemun’s fabric market is that the products are of high quality and so unique in design,” she said. “That fits well with the needs of young fashion designers that constantly look for ways to make their clothes different from others. For example, a lot of fabric made in Europe comes in around three colors, whereas Dongdaemun fabrics have color variations at an average of ten.” Like wholesale clothes, Dongdaemun also updates fabric on a weekly basis.
Oh added that Dongdaemun’s fabric factories accept small-quantity orders as small as one or two yards, whereas elsewhere the minimum order quantity would be several hundred yards. For young designers, such an obligation can be a risk because no one knows whether a design will be successful before it is presented to the public.
Dongdaemun’s markets aren’t the only thing that’s still open in the middle of the night. The coffee shops and restaurants in the area have also adapted to the neighborhoods nocturnal schedule.
One branch of the coffee franchise Ediya was still open at 1:30 a.m. The store’s manager said the cafe runs 20 hour day, from 8 p.m. to 4 p.m.
“We have the most customers between 12 p.m. and 1 a.m. - that’s the time when everybody starts to work,” he added.
As the clock reaches 3 a.m., daebongs filled with clothes began to appear on the streets, stacked up four to five bags high on wheeled handcarts. One buyer said he was moving them to load them on a bigger truck parked on another street. The five-ton trucks that carry the clothes around the country can’t park in the narrow alleys, so the daebongs have to be ferried to the trucks lined up on the main streets. The first trucks start to head off at around 3:30 a.m.
For those sa-ib samchons, the day finishes between 6 and 7 a.m. after the last truck heads out.
Many of the shop assistants and sa-ib samchons working in Dongdaemun dream of one day owning a shop of their own.
Han Sang-hui, 39, is one wholesaler whose dream actually came true. His career in the market spans well over 15 years, having started as a sa-ib samchon. He is now running a wholesale store with his wife. He also leads a sa-ib samchons team for Linkshops.
“When I first heard that this startup was trying to offer an integrated service for wholesalers online, I never thought it was going to work,” he said, “because I knew how accustomed Dongdaemun people were to our existing customs.”
“As a member of the team, it’s still amazing to see that this platform actually works. Little by little, more wholesalers recognize our names and some even come to us first, whereas in the past we had to go to them to persuade working with us. The more I work, the more I see this may get even bigger.”
BY SONG KYOUNG-SON [email@example.com]