Last September, Kurly sold cashmere knits from 'ORR' worth 1.5 billion won in just one day through a live broadcast. The summer product live broadcast conducted by the brand last month recorded 1 billion won in sales within two hours.
Kurly, known for its early morning delivery service 'SaeByeol Delivery' for fresh food, is strategically expanding its 3PL (third-party logistics) business that sells non-food products such as fashion and lifestyle items. 3PL refers to a model where the seller manages inventory and shipping directly while paying a commission to the distribution platform, unlike Kurly’s 1P (direct purchase) model, which holds inventory. This model was introduced as part of a diversification strategy that includes previously launched businesses like BeautyKurly and KurlyNow (quick service) to encourage loyal customers of Kurly to purchase other products.
According to Kurly on the 23rd, the share of the 3PL business in total transaction volume is in the single digits, but it shows the highest growth rate among the business divisions. The transaction volume of the 3PL business last year increased by 123% compared to the same period the previous year, and the transaction volume in the first quarter of this year increased by 72% compared to the same period last year. Additionally, the 3PL model is contributing to profitability improvements in conjunction with the Fulfillment By Kurly (FBK) service launched in August 2023. The transaction volume of the FBK business last year increased approximately tenfold compared to the previous year.
In the commerce platform industry, the 3PL business is often synonymous with open markets. However, Kurly emphasizes that its 3PL differs in nature from an open market, which is defined as an 'online marketplace where multiple sellers can freely sell products.' Unlike existing open markets that allow multiple sellers to sell the same brand or product, creating price competition, Kurly's 3PL sells only verified products, thus guaranteeing quality. In other words, they have integrated the advantages of 1P into 3PL to create 'Kurly's unique 3PL' model.
ChosunBiz met with Song Seung-hwan, the head of Kurly’s lifestyle and fashion division, at Kurly’s headquarters in Gangnam, Seoul, on the 17th. Song, who previously oversaw the 'Smile Delivery' service at eBay Korea, joined as the CEO of Kurly Nextmile, a subsidiary of SaeByeol Delivery, in 2021 and is currently overseeing Kurly’s 3PL business. He noted, '3PL is a means of optimizing the sale of fashion and lifestyle products,' and expressed confidence that 'the transaction volume for 3PL could reach trillions in the future.' The following is a Q&A with Song.
Please introduce Kurly's 3PL business.
'Kurly has been testing the sale of non-food products such as travel since 2021, and we have been operating with a structured organization since the second half of 2023. I joined the headquarters at the beginning of this year.'
While it’s commonly thought that '3PL=Open Market,' we tried to approach 3PL from a category perspective. Until now, Kurly has selected products based on curation for sales through direct purchase but determined that it was not suitable to serve non-food items in the same way. Particularly in fashion and living, where customer preferences (such as color, design, size, etc.) and trends significantly influence purchasing, it’s much more efficient to secure only a small quantity of stock that aligns with trends rather than buying large amounts of one or two products.
The ability to select and recommend good products is Kurly's highest value, and to excel at that, we utilized 3PL to create 'Kurly's unique 3PL' model. Therefore, the division is not called the 3PL division but rather the lifestyle and fashion division. For example, unlike traditional open markets where anyone can come and sell, we carefully select our partners for entry. Multiple sellers do not sell the same product but rather a single product through brand headquarters or certified partners. Additionally, after entering, we conduct a weekly product committee to verify the products, which is the same process as the food review sessions that Kurly holds weekly.
If open markets serve as an Everything Store where one can search and buy anything, Kurly sells products that have been somewhat verified. Currently, the 3PL consists of over 1,500 brands and approximately 40,000 products, with the largest shares in fashion, living, and kitchen goods, also dealing in furniture, home decor, and small kitchen appliances.
The entry into the fashion and living sectors has been relatively late. What is your differentiation strategy?
'The thorough verification process that 3PL products undergo is our differentiation strategy. Kurly's customers generally have a high preference for quality products. They favor products that have a clear style or preference, not just cheap or expensive items. We align fashion and lifestyle product lines with that. In fashion, we primarily source independent designer brands that are not available on any platform. While the price range may be higher, the concepts are clear, and the quality is good.'
For example, 'ORR' is a women's clothing brand that is exclusively available on Kurly, and it sold over 1 billion won in just two hours during a live broadcast selling summer products last month. The number of views reached 240,000. Premium kitchen goods and hotel bedding also achieve daily sales in the millions of won. When good assortments appealing to the primary target audience of customers in their 30s and 40s are discovered and marketed, the potential for explosive sales is significant.
Additionally, similar methods applied in the lifestyle category as those used for managing private brand (PB) or exclusive products in the food category are also being used. Recently, in celebration of Kurly's 10th anniversary, exclusive products like purple containers and tumblers have gained a good response. Furthermore, the logistics competitiveness related to the FBK service launched in August 2023 can also be considered a differentiation strategy.
How does FBK compare to other companies' fulfillment services?
'Half of Kurly's fashion products are sold through early morning delivery. Customers generally prefer early morning delivery, so products that are somewhat successful in sales are transitioned to the FBK model. This creates an effect of customers adding fashion or living items while shopping, significantly increasing the conversion rate. From the brands' perspective, they also expect early morning delivery when partnering with Kurly, so they are paying attention to the enhancement of the FBK system. Recently, we overhauled the FBK systems managed by our partners on a large scale. For instance, we rapidly optimize when to stock products based on the inventory levels of logistics centers in Changwon, Pyeongtaek, Gimpo, etc.'
In the case of fashion, the logistics complexity is high. There are various colors and sizes, and new products are launched every season. Additionally, items must be stored on hangers. The unique concepts and sensibilities that each brand possesses lead to different purchasing patterns compared to food items. However, if one thinks of it as a collection of fashion brands suitable for Kurly rather than the entire fashion market, we have a high understanding of our customers and the advantage of directly handling logistics.
What impact does the 3PL business have on Kurly's revenue?
'Food items have lower unit prices but are purchased daily, while lifestyle items have higher unit prices but are not purchased as frequently. We facilitate a synergy where customers discover and purchase new products while shopping. Although the transaction volume of the 3PL business is in single digits percentage-wise, we believe it could reach double digits this year based on growth trends.'
In fact, it’s not always the case that engaging in 3PL guarantees high profitability. While the inventory burden that occurs with direct purchases is less in 3PL, which may help profitability in that sense, there are not many examples of open-market platforms solely operating 3PL that are profitable.
Ultimately, even with 3PL, we aim to operate in a way that secures profitability by partnering with official brand companies to provide quality products. Additionally, we can also expand advertising revenue through 3PL. With the previous direct purchase model, applying advertisements was difficult, but now advertising through product displays is expected to become active.
What strategies are you focusing on this year?
'Many people still do not know that they can buy household items or fashion at Kurly. Our goal this year is to ensure that as many customers as possible experience the products we offer. To achieve this, we are making efforts to diversify our product assortment as much as possible. Moreover, we are conducting various marketing and sales programs to impactfully showcase the increased assortment to customers and encourage purchases. Starting this month, we are also conducting living festivals and fashion festivals every other month as part of this strategy. In a recent 10th-anniversary TV advertisement, the couple Lee Hyori and Lee Sang-soon have a conversation saying, 'Can you buy this at Kurly?' highlighting that Kurly also sells fashion and living products.'
What are your future goals?
'I am not sure how many years it will take, but I am confident that 3PL will grow into a trillion-won business. Ultimately, the goal is to make 3PL a matter of course in terms of categories, not just a new business for Kurly. I often tell Kim Seul-ah that when you want to buy something good offline, you go to a department store; similarly, I want Kurly to be the go-to place online when seeking something emotional and good without needing to search for it. Just as there are various products on different floors of a department store, I hope that Kurly can evolve into a platform with various high-quality offerings in one place.'