Exclusive: Qoo10 cash crisis costs Chinese sellers an estimated $18.8M

Industry

Exclusive: Qoo10 cash crisis costs Chinese sellers an estimated $18.8M

Published: 22 Aug. 2024, 06:00 Updated: 23 Aug. 2024, 15:05

KIM JU-YEON
kim.juyeon2@joongang.co.kr

Merchants and customers affected by TMON and WeMakePrice's liquidity crisis stage a protest in front of TMON's headquarters in Gangnam District, southern Seoul, on Aug. 13. [NEWS1]

Multiple Chinese sellers are reporting millions of dollars in losses from unpaid earnings due to the ongoing liquidity crunch at e-commerce sites TMON and WeMakePrice.

A major Chinese seller on Qoo10-affiliated e-commerce platforms told the Korea JoongAng Daily that the business hasn’t received $5.7 million in payments from the online retailers, and will be owed an additional $600,000 in due payments come Aug. 31.

The CEO of the Chinese distributor plans to file charges against the Korean e-commerce sites in Singapore, where Qoo10 is headquartered, on the assumption that he won’t be seeing that money anytime soon.

The claim indicates that the financial woes of the Qoo10-affiliated platforms are impacting not only domestic sellers but also those in China, a major import country for Korea for a wide range of industrial products, and likely merchants in other countries as well, with local media outlets reporting that Japanese sellers have also suffered losses.

Chinese sellers hit with $18.8 million in losses

Li Yeqi, the CEO of multiple Chinese distributors — including LKQ Group and Zhengzhou YC — that sell mostly household electronics on Korean online marketplaces, is one of many overseas retailers who are in the precarious situation of having millions of dollars tied up, yet unable to apply for the Korean government’s support plan for merchants. The relief budget was bumped up to 1.6 trillion won ($1.2 billion) on Wednesday to cover damages amounting to 818.8 billion won in due payments to sellers.

Li Yeqi, CEO of LKQ Group and Zhengzhou YC, sits down for an interview with the Korea JoongAng Daily on Aug. 12. He claims his businesses have not received $5.7 million in due payments from Qoo10 and its affiliates. Li requested his face be blurred for online publication. [KIM JU-YEON]

Documents reviewed by the Korea JoongAng Daily — consisting of bank statements, customer purchase receipts and invoices — shows that of the $5.7 million owed to Li's businesses by Qoo10 and its affiliates as of Aug. 12, $2 million needed to come from Qxpress; $200,000 from TMON; 2,800 yuan ($393) from WeMakePrice; and the rest, some $3.5 million, from Qoo10.

Based on his conversations with retailers on the mainland, Li estimates the total earnings owed to major Chinese sellers by Qoo10 to amount to $15 million and $3.8 million by Qxpress.

“All of the big overseas sellers know each other,” Li said, while sitting down for an exclusive interview with the Korea JoongAng Daily on Aug. 12. He had flown into Seoul to meet with affiliates under Qxpress, a logistics subsidiary under Qoo10, to discuss unpaid earnings and solutions. It wasn’t his first time.

“I came to Korea twice this year, in May and July, to talk with Qoo10 [affiliates] after they ignored our emails. Both times they appeased me, saying all payments would be made soon,” the CEO said.

“We were able to withdraw small amounts of earnings after each meeting, which made us think the money was indeed on the way. But it was substantially less than what we were owed, and eventually, that stopped too.”

The faces of Qoo10 CEO Ku Young-bae, right, TMON CEO Ryu Kwang-jin and WeMakePrice CEO Ryu Hwa-hyeon are attached to black umbrellas as part of a protest staged by merchants and customers affected by the Qoo10 e-commerce platforms' liquidity crisis in front of the Financial Services Commission headquarters in Jongno District, central Seoul, on Sunday. [YONHAP]

Representatives from Qoo10 and Qxpress could not be reached for comment.

During the May meeting, Qxpress promised to send the entire amount of overdue payments by the end of June; what came instead by the end of May was $300,000, and after the July meeting, only an additional $110,000 was remitted. In the end, his request to withdraw $2.8 million from Qxpress was met with a total of $800,000.

This was in line with what had happened even before the meetings. Li had asked Qoo10 for a withdrawal of $7.49 million in earnings for Xiaomimi, an electronics shop, in January, but was only sent $5.39 million.

While domestic merchants only became aware of how bad the situation was in July, Li claims payments have been delayed from much further back: October 2022, to be exact.

“At first, the delayed period would be around two months. And even then, the amount would be spread out and divided into smaller amounts. That period started to get longer and longer.”

Fraught solutions

After hassling Qoo10, Li was offered a deal to supply products to Qxpress, which the parent company promised was not facing liquidity problems. From Feb. 18, Li’s distributors started supplying their goods to Qxpress, which were eventually sold on TMON and WeMakePrice, according to the CEO.

Li eventually stopped shipping items in mid-July, after reports of the severity of Qoo10’s liquidity crisis came to light. This ended a six-year partnership that had started in 2018. Why hadn’t he stopped earlier?

“Items sold on Qoo10 platforms make up 60 percent of our revenue,” the CEO said. He claims his businesses make $50 million in revenue each year; in short, the $30 million was too big to give up.

Qoo10 acquired North American e-commerce platform Wish in February. [WISH]

In June, Li was offered a deal to partner with a Shanghai-based subsidiary under Wish, Qoo10’s North American e-commerce platform. He signed a deal with Wish to receive $1 million each week in Chinese yuan in advance payments, which would be used to purchase and deliver goods. Li’s distributors never saw the money, and that deal also fell through.

Canceled shipments

Li’s company is also one of many Chinese firms that have abruptly canceled shipments to Korean consumers after realizing there was a high possibility they would never get paid. Yonhap reported in early August about customers who made direct purchases of items from China that went through Korean customs but were not delivered.

Li says all items sold through his businesses have been refunded; the reimbursement responsibility for orders through his LKQ Group was laid on Qxpress, while items sold through Zhengzhou YC were refunded directly from the company.

Moving forward

Li is preparing to sue Qoo10, but says it would be difficult as he would have to sue all four entities: Qoo10, TMON, WeMakePrice and Qxpress.

Qoo10 founder and CEO Ku Young-bae attends a hearing at the National Assembly in western Seoul on July 30. [NEWS1]

During the interview, he indicated a wish for Qoo10 to normalize operations, yet remained skeptical about CEO Ku Young-bae's proposition to restructure the company. Ku plans to merge TMON and WeMakePrice under a new business entity, the K-Commerce Center for World (KCCW), and make the unpaid merchants on the two platforms the largest stakeholder.

"What a joke," Li replied when asked his thoughts on Ku's plans.

“It seems unreliable,” he said, adding that there was “too much money at stake to consider continuing business with Qoo10.”

In an email on Wednesday, Li said the meeting with Qxpress had not been fruitful. His business had signed a contract with KDS, a subsidiary under KCI that is itself under Qxpress. Both argue that Li’s companies’ accounts are not under their control.

“We’re in a situation where everyone is placing the blame on each other,” Li said.

BY KIM JU-YEON [kim.juyeon2@joongang.co.kr]