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THE INVESTOR
August 19, 2018
Big Reunion

Finance

[INTERVIEW] E-commerce platform cafe24 set to go global after IPO

  • PUBLISHED :January 22, 2018 - 18:28
  • UPDATED :February 08, 2018 - 11:02
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[THE INVESTOR] Regular online shoppers may not be familiar with cafe24, but it’s Korea’s leading e-commerce platform that’s home to some 1.5 million online merchants.

Founded in 1999, the company is now ready to branch out overseas in earnest after its initial oublic offering on Feb. 8 when it becomes the first in Korea to go public under the so-called Tesla standards. It’s also been a year since the company made a turnaround. 

Named after the iconic US electric carmaker that got listed on NASDAQ for its future potential, Tesla standards allow the listing of promising companies in Korea that have not yet posted significant profits.

Cafe24 -- spelled with a lowercase “c” to stand out from the crowd -- recorded operating losses for five consecutive years from 2012 to 2016 largely due to its heavy investments in building infrastructure in foreign countries and forging partnerships with some 80 overseas partners such as amazon.com, Alibaba’s Tmall.com and Rakuten.

   

Cafe24 CEO and co-founder Lee Jae-suk. Park Hyun-koo/The Investor


“In Korea, you would go bankrupt if you remain in the red for five years. We couldn’t have endured without a vision for the future,” Lee Jae-suk, founder and CEO of the company, told The Investor in a recent interview.

Lee said the past financial failures laid the groundwork for global expansion and achieving his vision to build a long-lasting ecosystem for both domestic and overseas online merchants. “After the IPO, cafe24 will help anyone who aspires to be an online merchant market their products in global markets.”

Cafe24’s main line of work is helping Korean online shopping malls launch, whether at home or overseas. So far, it has helped about 60,000 Korean online shopping malls go beyond the borders. Some of them, such as fashion brands Im Vely and 66 Girls, which led the popularizing hallyu, have established their global status, attracting significant traffic from overseas. Its platform is currently available in seven foreign languages including English, Japanese, Chinese and Spanish.

From the funds raised by its upcoming IPO on secondary bourse KOSDAQ, the company hopes to start providing its solutions to foreign customers. And its first target market is Japan.

“Until recently, Japanese merchandisers and artists didn’t seem interested in expanding their business. But they now have an increasing appetite for going abroad,” Lee said.

Analysts also see that cafe24’s global investments started to pay off from 2017. The company is expected to report 135 billion won (US$125.50 million) in sales and 7 billion won in revenue last year. In 2018, the company is expected to achieve 182.4 billion won in sales, up 33 percent from a year ago, and 26 billion won in revenue, jumping 239 percent on-year, according to Lee Dong-yun, an analyst with Korea Investment and Securities.

The estimated total transactions at cafe24-registered shopping malls totaled 6.5 trillion won in 2017, jumping 51 percent from the 4.3 trillion won in 2015.

“About 60-70 percent of new online shopping malls use the solutions provided by cafe24,” said Son Yun-kyung, an analyst at SK Securities in a report earlier this month. “As the number of online shopping malls grows, along with the volume of transactions, so are the profits of the companies.”

No doubt, this year will be an important milestone for cafe24, whose public offering will be closely watched by investors, along with its growing overseas reach.

“When I founded the company in 1999, I had a strong belief in the internet, and more belief in the related infrastructure,” said the CEO. “Our company has been building that infrastructure, and as we head to an area where online exchange of information and goods and services will become ever more important, I firmly believe in the future of our company.”

Cafe24 shares are expected to debut from 43,000 won to 57,000 won apiece, according to the company’s regulatory filing. The market cap will reach 381 billion won at the lower bottom of the expected price band. The lead IPO advisers are Mirae Asset Daewoo and Yuanata Securities Korea, while the co-underwriter is Hanwha Investment and Securities.

By Park Ga-young (gypark@heraldcorp.com)

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