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South Korea’s online fashion stores are emerging as new investment opportunities.

According to industry sources on January 30, financial investors (FIs) are flocking into online fashion stores after Musinsa, South Korea’s largest online fashion platform, put its name on the list of unicorn companies last year. A unicorn refers to a startup company with a value of over one trillion won. FIs view unicorns’ strong growth potential would enable them to exit the investment easily by taking them public or selling equity stakes. Also, considering there have been active mergers and acquisitions (M&A) activities among online fashion platform companies recently, FIs seemingly anticipate higher valuation via further M&A deals.

Amid the rise of online market in the domestic retail industry, e-commerce companies, including online fashion stores are in fierce competition. FIs see online fashion stores as new investment opportunities with great growth potential with online platforms becoming major channels for buying clothes. Unlike ordinary e-commerce companies which sell almost all products, online fashion stores are specialized in apparel.

Musinsa received an investment of 200 billion won from the largest venture capital firm in the world Sequoia Capital last year and confirmed its corporate value at two trillion won. Before that, South Korea’s IMM Private Equity (PE) acquired an 80 percent stake in W Concept Korea (W Concept) in October of 2017. IMM PE valued a 100 percent stake of the company at 100 billion won. Since the acquisition, the value of the W Concept has increased dramatically.

It is said that Musinsa expressed its intent to acquire W Concept to IMM PE at the end of last year and currently negotiations are underway between the two. Musinsa, which largely targets men, will be able to expand its business by acquiring W Concept, which mainly focuses on women in their 20s and 30s.

Recently, South Korea’s PE firms Stonebridge Capital-KB Securities PE invested 10 billion in fashion platform StyleShare. Similar to Musinsa, users of StyleShare can share their personal style, purchase fashion and beauty items and sell secondhand apparel to other users in the community.

However, unlike Musinsa, StyleShare’s prime focus is on teenagers. To expand its business, the company acquired online shopping platform 29CM (a+b) in 2018. Although 29CM also has the similar business model to that of StyleShare, they target different age groups and 29CM differentiates itself with professional generated contents.

StyleShare’s peer group competitors include ZigZag, Ably, and Brandi. 29CM competes with W Concept. Brandi, which was established in 2014, also continues to receive investments from venture capital firms. As of the end of 2019, the company has received around 13.5 billion won.

Market watchers pay attention to whether online fashion stores will hold hands when FIs exit their investments in the companies. “With Musinsa becoming the new unicorn, market watchers anticipate that enterprise value of online fashion platforms will be appreciated. They are paying attention to possibility of further M&A deals,” said an industry source.

(By reporter Kim Hye-ran)