Leveraging the 10 years of running a successful early-stage accelerating program from its headquarters at San Francisco, 500 Startups Korea has launched the “Seed Program” in May. 750 startups applied, and we have selected a couple of companies to work with. (Drum roll~~) Please join me in welcoming 500’s new family, Donggle.
Donggle is a B2C fashion fulfillment commerce platform. Without any middlemen, it directly connects fashion wholesalers from Dongdaemun market* and customers through its website and mobile app. What made Donggle attractive was that its founder, Youngha Choi, is someone that could be denominated as a “Dongdaemun native” based on her years of experience of selling in the market.
*Dongdaemun Market is a large commercial district comprised of 26 shopping malls, 30,000 specialty shops, and 50,000 manufacturers. (Source: VisitSeoul)
Donggle’s customers need to pay a 5,000 KRW monthly subscription fee in order to purchase fashion items from Dongdaemun shopping malls at a wholesale price, which is 40-60% cheaper when compared to retail price. Donggle handles logistics on behalf of the wholesalers by doing bundle delivery, so customers are not burdened by individual delivery fees. Customers can easily place their orders through the website or mobile app and receive their purchased products, all without having to visit the bustling Dongdaemun Market themselves.
The Dongdaemun wholesalers, who are on the other shareholders in this platform, can make extra profit by selling online through Donggle. There is a common saying among Koreans that ‘Dongdaemun market never sleeps’. This means that it is nearly impossible for wholesalers to allocate their time and energy to sell online even if it guarantees an extra profit. Clothes made one afternoon can hit shelves the very next morning. Wholesalers mostly open their stores at night, and retailers purchase offline in Dongdaemun and sell them online. And, there are parts of the market that also have retail markets available for ordinary consumers during the day.
According to KIET (Korea Institute for Industrial Economics & Trade), the estimated size of Dongdaemun market, is $12 billion, making it the leader of “fast-fashion” in Asia. However, online innovation has not been so fast in this fashion hub. Only about 6% of the market is connected to some form of online(estimated by GMV through B2B platforms e.g. Linkshops and Sinsangmarket).
There are 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 them, Dongdaemun is the only one where the wholesale market runs until dawn.
There are several major fashion fulfillment startups out in the market. However, none of the sellers in those platforms are Dongdaemun wholesalers since they are mostly retailers that resell items purchased from Dongdaemun Market. This is why Donggle has price competitiveness compared to other fashion fulfillment services. This is possible because the founding team understands Dongdaemun fashion market inside-out and is able to articulate in the colloquial language as the wholesalers. Donggle has connected approximately 100 wholesalers in the app(and web) so far, and they sell the same items to ordinary consumers and retailers for the same price.
Even though the business model is different, those platforms have proved that online fashion platforms based on Dongdaemun Market are growing fast and that disruption might change the market dynamics of this traditional market. This offline-to-online transition will not only affect the Korean fashion industry but that of all neighboring countries like China and Southeast Asia.
Youngha Choi, the CEO & co-founder, grew up working with her parents who also used to be Dongdaemun fashion wholesalers from a young age. She organically started her own career in the market as a fashion wholesaler at one of Dongdaemun shopping centers. She has noticed the growing pain points of wholesalers who have been struggling to keep up with market transformation. It is getting harder to keep price competitiveness against Chinese wholesalers that copy Dongdaemun designs, manufacture them overnight, and sell them at a cheaper price point that of the clothes made in Korea.
Dongdaemun has been hit hard by external risks multiple times such as diplomatic conflict with neighboring countries and the recent COVID-19 outbreak which led to a decrease of visitors and bulk buyers coming to Seoul. It will continue as long as it is heavily dependent on offline sales. The co-op of shopkeepers of Dongdaemun shopping centers had already tried to build an online market targeting global customers, but it didn’t work because of a lack of experience and knowledge. Donggle is capturing that market opportunity to transform the giant fashion mecca of the region, and 500 Startups is thrilled to be a part of its growth.
Written by Yolanda Kim (Investment Principal)
