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- If you are a Naver seller, you would know that you can apply for Naver's logistics platform NFA (Naver Fulfillment Alliance) partner logistics services through the admin page. As Naver’s logistics platform aims to be on-demand, there has been a separate category called 'Dongdaemun Fashion' from the beginning. However, two companies' services that have been active since the NFA launch recently disappeared. These are 'Selpi', operated by Brandi's subsidiary Avidenf, and 'Deliverd', operated by Delicious. What exactly happened?
- First, we heard the official positions from NFA's operating company Naver, and the companies whose services disappeared from NFA, Brandi and Delicious. However, there seems to be a discrepancy between Naver's explanation and the stories from the companies that withdrew. We have detailed information.
- To understand the reason, we need to delve deeper. Apart from the official responses, we gathered stories from former and current employees of partner companies that were involved in Naver's Dongdaemun logistics operations. This brings up some surprising revelations. The reason these partner companies joined NFA was largely due to the expected influx of orders through Naver. But, setting aside the volume of orders, it turns out that they actually incurred losses?
- Nevertheless, there is still one Dongdaemun logistics service remaining in Naver. We examined how this service operates. On the other hand, there are opinions that Naver might also feel wronged. This is due to the challenging macro environment surrounding the Dongdaemun fashion industry. We have organized the reasons based on the stories from practitioners in the Dongdaemun fashion industry. Ultimately, can Naver uphold the values of mutual growth they emphasize?
'Dealibird' and 'Selpi' Disappear from NFA
Those who have been interested in Naver's logistics platform NFA (Naver Fulfillment Alliance) since its early days will remember. Launched in July 2021, NFA was touted as an 'on-demand logistics platform'. It aimed to satisfy the diverse logistics needs of sellers on Naver, not just fast delivery, thereby differentiating itself from Coupang.
Naver didn’t operate the on-demand logistics service directly. Instead, it aimed to provide this service by building an alliance with several logistics service companies through investments and stock exchanges, centered around Naver's system. Since the launch of NFA, 'Dongdaemun Logistics' has been one of the specialized areas of on-demand logistics. Here, the fulfillment services 'Deliverd' by Shin Sang Market (operated by Delicious) and 'Selpi' by Brandi's logistics subsidiary Avidenf were linked and offered.
However, as of the end of last year, the services of Deliverd and Selpi, which could be applied for through the Naver Smart Store seller management page, disappeared. According to our investigation, in November 2023, Delicious' Dongdaemun fashion fulfillment service 'Deliverd' withdrew from NFA. In December of the same year, Avidenf's 'Selpi' also vanished.
Initially, at the launch of NFA, partner logistics operators including Deliverd and Selpi were expecting a significant influx of new customer orders from Naver Smart Store. Particularly, Naver had raised expectations by announcing that it would connect Korean Dongdaemun fashion sellers to the Japanese market through its joint venture Z Holdings (currently Line Yahoo, LY Corporation) with Yahoo Japan, and the Japanese version of the Smart Store 'My Smart Store'. In fact, Deliverd and Selpi were at the forefront of Naver's entry into Japan. What happened to them that led to the decision to leave Naver's alliance?
We were able to receive official responses from Naver, the company operating NFA, and from Shin Sang Market and Brandi, the Dongdaemun logistics partners who chose to leave NFA. Based on the stories of current and former employees of NFA logistics partner companies, we could understand the more specific background of why the Dongdaemun fashion logistics partners left NFA. We summarize the backstory.
The Reasons Behind Each Company's Departure from NFA
We first asked Naver about the reasons behind the disappearance of Selpi and Deliverd from NFA. Naver responded by stating that "the two companies decided to terminate their fulfillment services, leading to their departure from the NFA Dongdaemun fashion category."
However, according to Connectors’ verification of the positions of Brandi and Delicious, this answer is only partially correct. In the case of Shin Sang Market, it is true that they officially ended the Deliverd service. Deliverd announced in November last year that it would sequentially terminate its services by February 8th, and according to the schedule, the integration service of Naver Smart Store with Deliverd also ended in January.
A representative from Delicious, which operates Deliverd, explained, "Although the number of Deliverd users steadily increased, we decided to focus our efforts on the Dongdaemun fashion B2B commerce ‘Shin Sang Market’ rather than fulfillment." As Deliverd, the B2C Dongdaemun fashion logistics service linked with Naver Smart Store, withdrew, it naturally led to its exit from NFA. This aligns with the official reason explained by Naver.
However, the situation with Brandi seemed somewhat different from Naver's explanation. According to Connectors' findings, Brandi planned to continue operating the fulfillment service 'Selpi' through its subsidiary Avidenf. A Brandi representative stated, "Due to not meeting the business profit standards and the volume of goods movement in cooperation with Naver Fulfillment Alliance, it was mutually agreed to terminate the service." In other words, Brandi left the alliance after determining that it did not achieve satisfactory volumes and profits through participation in NFA.
On one hand, Brandi announced a switch to monthly profitability in July last year. However, separately, recent sales have been on a declining trend. According to public disclosures, Brandi's sales in 2022 were 117.2 billion won, a 7.1% decrease from 2021 (126.2 billion won). According to the last-mile logistics industry, Selpi's volume also continued to decline last year, only recently stabilizing. These are the results Brandi achieved after the official launch of NFA in July 2021. Although it's an exaggeration to interpret that Brandi's growth obstacles were due to Naver, it is true that Brandi's growth slowed down after joining NFA.
Did They Suffer Losses Because of Naver?
During our investigation, we heard from former and current employees of NFA partner logistics companies in Dongdaemun that the withdrawal of Deliverd and Selpi from NFA might also be attributed to 'Naver's responsibility'. This view differs from Naver's explanation that 'the partners' Dongdaemun logistics services ended, leading to their natural exit from NFA'.
According to Mr. A, a representative of an NFA Dongdaemun logistics partner company who requested anonymity, Brandi and Shin Sang Market collaborated with Naver to promote the entry of Dongdaemun sellers into Japan, involving frequent meetings and various discussions. Particularly, Brandi actively invested, such as contracting a separate logistics center in Incheon, in anticipation of the increased volume from overseas shipments. However, as Naver's plan for Dongdaemun fashion sellers to enter Japan fizzled out, the investment in logistics centers and staffing became a 'loss' for the partner logistics companies.
"A logistics service takes over three years to gather customers, stabilize the service, and create efficiency. But the NFA Dongdaemun fashion logistics partners started feeling marginalized by Naver before even two years of full cooperation. One reason might be that Naver considered these services less profitable compared to Brand Stores or Arrival Guarantee. The startups in the Dongdaemun fashion industry, who trusted Naver and invested time and cost, bore the brunt of this. It seems like Naver just wanted to test the business viability using these startups," said Mr. A.
Mr. B, another representative from an NFA Dongdaemun logistics partner, mentioned that delays in Naver's solution development also exacerbated the partners' difficulties. Fulfillment in Dongdaemun, which starts with wholesaler procurement without separate inventory, is highly challenging due to many products lacking labels or barcodes, making digitalization and solution integration crucial for managing numerous SKUs (Stock Keeping Units).
However, according to Mr. B, the development of related solutions and features by Naver was delayed by nearly a year. Consequently, the customer experience using Dongdaemun logistics through NFA worsened, with the burden falling on the partner logistics companies.
If Naver Smart Store sellers had continued to bring even a small volume of orders through NFA, there might have been no reason to leave. However, as described by the aforementioned representatives, if NFA negatively impacted the partners' costs and operational efforts, their departure from the alliance becomes understandable.
We sought Naver's official stance on these claims made by the representatives who experienced NFA Dongdaemun logistics. Specifically regarding the business schedule changes and delays in system integration with Smart Store, which they claimed hindered smooth operations.
Regarding logistics center and staffing investment: Naver did not provide any guarantee or engage in negotiations regarding the mentioned Incheon logistics center.
Regarding system development and integration delays: The logistics companies requested integration for procurement and inspection processes, which required data integration. However, progress was difficult as the logistics companies were passive in data integration, and their fulfillment services ended during the resolution and progression process.
Naver's efforts: Naver has been supporting Selpi and Deliverd with service support suitable for them during the operation of NFA. Different from the quotation-type service of other partners, we supported the development of approval-type services suitable for Dongdaemun fulfillment. We also managed and communicated the necessary information during the application process for Dongdaemun logistics services. Regarding joining the Arrival Guarantee, we proposed to the partner logistics companies, but they showed no intention of developing the API.
One partner logistics company, different from the condition of handling all-in-one orders, returns, and CS, reduced its services and notified Naver in August that it would complete shipments by November and terminate the service due to internal reasons. During the service reduction, many seller VOCs (Voice of Customer) occurred, and Naver took care of sellers through special promotions and logistics cost support.
The reason Selpi and Deliverd ended their NFA participation is due to the termination of their Dongdaemun fulfillment services. Naver is supporting the necessary fulfillment services for Dongdaemun fashion sellers by newly adding Pasto X Celup service. - ©Naver's response summarized by CONNECTUS
The Remnants of Naver's Dongdaemun Logistics
As a result, the only Dongdaemun logistics service remaining on the NFA logistics platform is the one operated by Shareground's Dongdaemun procurement solution 'Celup' in collaboration with another Naver logistics partner company 'Pasto'.
According to Shareground, this service is not directly operated by Celup. Celup had set up its own logistics center in 2022 to run the fulfillment business, but it terminated this related business last July. The service currently displayed on NFA is where Celup provides the Dongdaemun procurement solution, and the actual logistics operations are handled by Pasto. Thus, there are no longer any services within NFA that fully internalize Dongdaemun fulfillment.
The current environment surrounding the Dongdaemun fashion market is not easy. This is due to the growth of China-based cross-border e-commerce platforms like AliExpress, Temu, and Shein. Dongdaemun wholesalers have long operated by sourcing cheap fashion products from the Chinese market and reselling them domestically. However, current insiders report an increase in the proportion of delayed arrivals of products shipped from China to Dongdaemun in the post-pandemic era. This leads to wholesaler stockouts and degrades the quality of Dongdaemun fulfillment services.
Insiders attribute the delayed arrivals of Chinese import volumes to the growth of Chinese cross-border e-commerce platforms. The number of Chinese fashion suppliers directly entering platforms like Temu and Shein to sell in the Korean market via global D2C (Direct to Customer) is increasing. This leads to speculation that they might be neglecting the less profitable Korean middlemen, the Dongdaemun wholesalers, resulting in supply instability. Hence, there is also an opinion that it is unreasonable to blame Naver solely for the various crises faced by the Dongdaemun fashion platforms that were NFA partners.
While we haven't yet received Naver's position, Naver might also feel wronged. Readers will empathize that business plans don't always go as hoped for various reasons. Naver has already invested billions of won in either Brandi or Shin Sang Market. Naturally, Naver benefits financially if these companies do well. If they face difficulties, Naver can also be seen as incurring losses beyond its investment amount.
However, some former and current employees of Naver's logistics partner companies shared during our investigation that they felt marginalized by Naver in the course of their work. Although it's truly challenging to cater to all diverse interests within an alliance, we hope that Naver will prove its commitment to mutual growth and partnership as it pursues its direction of co-prosperity.
Written by Shin seungyoon. He is currently working as an e-commerce logistics specialist journalist at BEYONDX(CONNECTUS).
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