South Korea will provide US$400 million in financial support to small businesses hit by payment delays on two Qoo10 e-commerce platforms, and the Singapore-based firm’s founder pledged to use his own assets to help compensate customers and vendors.
Seoul-based Tmon and WeMakePrice have failed to make payments to merchants using their platforms since early July, with Qoo10 saying the problem was triggered by a glitch in its payment system.
The payment delays have prompted South Korean financial authorities to launch an investigation, some vendors to cut ties and long lines of customers at offices of both platforms last week demanding refunds.
Missed payments by the e-commerce platforms have grown to around 210 billion won (S$203.8 million), the government estimated.
South Korean financial authorities said they will provide low-interest loans for affected small businesses as well as extensions on repayments of existing loans and on tax payments.
“The government will utilise all available resources to minimise the damage,” Vice-Finance Minister Kim Beom-seok told reporters.
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Ku Young-bae, the South Korean founder and chief executive officer of Qoo10, apologised on Monday and said Qoo10 would secure emergency liquidity by drawing on overseas funds, or by disposing of assets and stakes or using them as collateral.
“I will sell or use my entire stake in Qoo10, which is most of my assets, as collateral and use it to resolve this situation,” he said in a statement.
Qoo10 said it estimated damages to customers at around 50 billion won, but it was difficult to give a figure for vendors.
The company told authorities it aimed to secure US$50 million to remedy the situation, but no detailed plan has been submitted, according to South Korea’s Financial Services Commission.
Affected vendors told reporters on Monday more than two months of revenue are tied up due to South Korean e-commerce firms’ practice of settling payments months afterwards, and for small vendors facing layoffs and even bankruptcy, Qoo10‘s announced remedy – shouldering delayed interest payments and reduction of sales fees – were sorely inadequate.
“We have hundreds of millions of won tied up in this situation,” Jung Bo-young, executive at healthcare product firm ANL, said at a press conference of affected stakeholders.
“Why should we shoulder the loans? Why doesn’t the government lend to Tmon, and they pay us?… As for the remedy, it looks to us like they’re just trying to buy time.”
Qoo10 also has operations in Japan, North America, China, Hong Kong, Malaysia and Indonesia, and owns two other South Korean e-commerce firms.
The company has not responded to Reuters requests for comment about the health of its other operations. Reuters
