E-commerce firms look to break into the fashion business

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E-commerce firms look to break into the fashion business

Major e-commerce companies are rushing to acquire existing fashion platforms as they try to encourage more shoppers to look for clothes online.

Kakao recently acquired Croquis, the operator of fashion shopping platform ZigZag. It is spinning off its style business from subsidiary Kakao Commerce and merging it with Croquis.
Around 4,000 online shopping malls sell products on ZigZag. It is the second-largest fashion platform in Korea, with 750 billion won ($670 million) after Musinsa.
SSG.com, Shinseage Group’s e-commerce arm, acquired fashion platform W Concept after fighting off competition from Lotte and CJ. W Concept is a fashion platform targeting women in their 20s and 30s.
Naver, which operates Naver Shopping, invested 10 billion won in Brandi, another fashion platform.
They each have different motives behind acquiring the fashion platforms.
Shinsegae hopes to transform SSG.com into a general online shopping mall. Its online business is currently focused on groceries, household appliances and furniture.
“For SSG.com to rise to become a general online shopping mall, it needs to operate an open market,” said Nam Seong-hyeon, a researcher at Hanwha Investment & Securities. “Acquiring W Concept was positive in that it has secured a foundation for fashion sales, which has been its weak spot.”
Kakao’s plan is to generate synergy with its Talk Gift, a gift sharing function on the messenger app. Instead of simply listing the products, Kakao customizes content based on big data. The operation is in line with ZigZag, which also uses artificial intelligence to recommend products based on the products users have previously bought.
“Unlike retail giants, Kakao is a tech company like ZigZang,” said a spokesperson for ZigZag.  
“Investments by venture capitals are concentrated on online fashion companies, while traditional fashion firms struggle,” said Park Jong-dae, an analyst at Hana Financial Investment.
For retailers, it is easier to acquire a successful shopping platform instead of directly launching their own platform because it has been difficult for a general online shopping mall to succeed in the fashion business.
But the online fashion market is big, with its market size standing at around 23 trillion won. It is also an important industry, as primary users are younger shoppers who could become a major purchasing power in the near future.
“The fashion category revolves around millennials and Generation Z that are sensitive to trends,” said Seo Yong-gu, a business professor at Sookmyung Women’s University. “Accumulating their big data is therefore crucial for e-commerce operators in establishing marketing strategies and deciding a company direction.”
“In particular, teenage consumers or those in their 20s could develop into loyal consumers once they gain purchasing power,” Seo added.  

BY BAE JUNG-WON, JIN MIN-JI [jin.minji@joongang.co.kr]
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