South Korea Pledges Support for Vendors Impacted by Qoo10 Payment Delays, Founder Vows Compensation

SEOUL, July 29 (Reuters) - In a significant move to support small businesses affected by payment delays on two e-commerce platforms, South Korea has announced a substantial financial assistance package totaling $400 million. This decision comes amidst a troubling situation involving Qoo10, a Singapore-based company, where its founder has pledged to use his personal assets to compensate impacted customers and vendors.

On Monday, TMON and WeMakePrice, both prominent e-commerce platforms operating out of Seoul, filed for corporate rehabilitation in the Seoul Bankruptcy Court after being unable to fulfill payments to merchants for an extended period since early July. The delays have been attributed to a technical glitch in Qoo10's payment system, which has led to substantial financial repercussions, including missed payments amounting to approximately 210 billion won ($152 million) to various vendors who rely on these platforms for their income.

The ongoing payment issues have prompted South Korean financial authorities to initiate an investigation into the matter, leading some vendors to sever ties with the troubled platforms. Meanwhile, customers have expressed their frustrations by forming long lines at the offices of both TMON and WeMakePrice, demanding refunds for their unpaid orders. The situation has highlighted the vulnerabilities within the e-commerce sector and the impact on small businesses.

To alleviate the strain on affected small businesses, South Korean financial authorities have committed to providing low-interest loans, as well as extending repayment deadlines for existing loans and tax obligations. Vice Finance Minister Kim Beom-seok emphasized the government's dedication to minimizing the damage caused by these payment delays, stating, "The government will utilize all available resources to support those impacted."

In a further escalation of the situation, South Korea's prosecutor general has ordered the establishment of a specialized investigative team to thoroughly examine the unfolding crisis, as reported by Yonhap. This reflects the seriousness with which authorities are treating the matter, given the potential ramifications for the broader e-commerce landscape.

Ku Young-bae, the founder and CEO of Qoo10, publicly apologized on Monday and outlined a proactive approach to securing emergency liquidity. He stated that the company would seek to access overseas funds or liquidate assets to address the financial shortfall. "I will sell or use my entire stake in Qoo10, which constitutes most of my assets, as collateral and use it to resolve this situation," he affirmed, showcasing his commitment to rectify the circumstances.

While Qoo10 has estimated customer damages at around 50 billion won, it has not provided a clear figure regarding vendor losses, leaving many affected parties in uncertainty. The company has communicated to authorities its intent to secure $50 million to remedy the situation, though it has yet to present a detailed plan to South Korea's Financial Services Commission.

The response from affected vendors has been one of frustration and anxiety, as many have noted that over two months of revenue is currently trapped due to the e-commerce industry's prevailing practice of delayed payment settlements. This issue is particularly pressing for small vendors who are facing layoffs or potential bankruptcy as a result of their financial ties to these platforms. The remedies proposed by Qoo10—covering delayed interest payments and reducing sales fees—are seen as inadequate by many, leading to calls for more substantial support.

"We have hundreds of millions of won tied up in this situation," stated BoYoung Jung, an executive at healthcare product firm ANL, during a press conference with affected stakeholders. This sentiment reflects the broader concerns within the small business community about the sustainability of their operations amidst such payment delays.

The ongoing crisis not only emphasizes the precarious nature of small businesses operating within the e-commerce ecosystem but also highlights the urgent need for more robust measures to protect their financial interests. As the situation continues to unfold, the focus remains on finding effective solutions that ensure the stability and resilience of small vendors, who play a critical role in South Korea's economy.