Episode 150
“Chairman! You’re amazing!” Managing Director Im Jong-geun said to me excitedly.
“Our large appliance sales have increased by 30% since we started the trade-in program.”
30%?
“Is that a lot?” I asked, unsure if it was a significant increase. I was used to much higher profit margins.
“Of course! Even a 10% increase would be huge, but 30% is exceptional!”
He continued to rave about the results, but I couldn’t grasp the significance of a 30% increase after being accustomed to exorbitant profits.
“Really?”
“Yes! The large appliance market is saturated, so it’s very difficult to increase market share. Even a 1-2% change is a big deal. And Daehoo Electronics was recently acquired after the parent company’s bankruptcy…”
He trailed off, realizing he was speaking to the one who had acquired the company, and I gestured for him to continue. “It’s the truth. The company has a negative image now.”
“Ah… yes. We were worried about the impact on sales, but this turnaround is a welcome surprise. Everyone is excited.”
I had thought it was a good idea, but I hadn’t expected it to be this effective.
“But there’s a problem,” he said with a troubled expression.
“A problem?”
“Saseong and MG are planning to launch their own trade-in programs.”
This was always the problem.
Whenever someone came up with a successful idea, copycats would emerge, flooding the market with similar products.
It had happened with electronic scrap and refurbished IC chips.
Why didn’t they understand that competing like that was pointless?
The electronic scrap copycats had all been crushed by me, and the refurbished IC chip market was saturated, with only distributors like my department store making any real profit.
“Saseong and MG are launching trade-in programs?”
“Yes, they’re offering similar trade-in values for old appliances.”
It wasn’t a difficult strategy to replicate.
But did they know?
I was the only one in Korea who could handle tens of thousands of used large appliances.
I was the king of secondhand goods.
“I started this as a small side business, and it’s become a huge success, attracting copycats.”
“Yes.”
I smiled. “Let’s ride the wave. Increase the trade-in values significantly.”
The trade-in values had been set with a reasonable profit margin in mind, but the situation had changed.
We had to crush the competition, even if it meant a price war.
“How much should we increase them?”
“About 1.5 times the current value.”
He said in alarm, “1.5 times?! That’s a huge loss!”
He didn’t understand the secondhand market.
The used appliances we collected were being repaired and sold to China, generating a substantial profit.
Even a 1.5 times increase in trade-in value wouldn’t be a problem.
He couldn’t understand why we would pay so much for broken appliances.
And neither could Saseong and MG.
“Managing Director Im,” I said with a smile, “do you know that the price of secondhand goods in Korea isn’t determined by market forces?” I pointed at myself. “I determine the price.”
“What? You can’t do that!” A Saseong Electronics executive said with a dumbfounded expression. “You said you would match Daehoo’s trade-in value!”
They had found a mid-sized used goods dealer to handle the appliances collected through their trade-in program, but the dealer had suddenly changed his mind.
“The price of used appliances has plummeted recently,” the dealer said with a troubled expression.
“Even so, you can’t just change the price now! We’re already printing flyers for our nationwide retailers!” The executive said suspiciously, “Are you trying to extort us?”
The dealer waved his hands. “No, sir! The price has really fallen. I’ll lose money if I buy at the original price.”
“Then what about Daehoo? Are they fools to buy at that price? And they recently increased their trade-in value by 1.5 times. You’re saying you can’t even match the original price?”
The dealer hesitated.
‘Should I tell him?’
Revealing his client’s identity was like surrendering his weapons.
If they knew who he was selling to, they would go directly to the source and cut him out.
But he couldn’t risk being caught between Saseong and Chunha Group.
He sighed. “I’ll be honest with you.”
“Please do. What’s going on?”
“Chunha Group is manipulating the market.”
“What?”
“I was hoping to get a lot of business from Saseong, but I’m mainly a domestic used goods dealer.”
The Saseong executive, unfamiliar with the secondhand market, tilted his head. “What does that have to do with anything? You can just export them.”
“Domestic means I sell within Korea. But the used appliances you’re collecting are too old and too numerous to be sold domestically. Maybe 1% at most. So most of them are exported.”
“Then export them.”
The dealer scratched his head. “The problem is that Chunha Trading controls 100% of the used appliance export market. I was planning to sell everything to them, but they’ve crashed the price since Daehoo Electronics started their trade-in program. They’re claiming it’s because of the increased supply, but I think it’s just an excuse.”
The Saseong executive, who had spent his entire career in manufacturing, couldn’t understand how such a thing was possible. A 100% market share?
“Chunha Trading controls everything? And how is that even possible? If the price is too low, you can just find other buyers overseas.”
“Well, there are a few small-time exporters, but they can’t handle the volume. And it’s not just about the price. In our industry, buyers are crucial, and the overseas buyers are all wary of Chunha Trading. Dealing directly with them would mean losing access to Korea’s secondhand market. And Saseong’s volume is too large to risk working with unreliable buyers. Even if the price is slightly lower, it’s safer to deal with Chunha Trading. They always pay in cash, so there’s no risk.”
The Saseong executive still couldn’t comprehend the strange dynamics of the secondhand market.
“It’s hard to believe, but it’s true. Chunha Trading controls the market and has lowered the price to support Daehoo Electronics. That’s all there is to it.”
How could a single company control the price of an industry with billions of won in transactions?
The used goods dealer looked at the dumbfounded executive and said with a wry smile, “Don’t try to understand. This market doesn’t operate on common sense.”
Saseong and MG were frustrated by the plummeting price, but they had no choice but to match Daehoo Electronics’ trade-in value and launch their own programs.
Their market share recovered, but they weren’t happy.
The problem was the used appliances they were collecting.
They tried to negotiate with overseas buyers, offering them a large volume at a discounted price, but the buyers all insisted on dealing through Chunha Trading.
There were other buyers, but their terms were suspicious. No contracts, no letters of credit, and even the payment method was unconventional, requiring inspection upon arrival.
They couldn’t send their goods without any guarantees.
Having exhausted all other options, Saseong and MG had no choice but to sell their used appliances to Chunha Trading, despite knowing they were being ripped off.
This forced trade-in program had significantly reduced their profit margins.
Chunha Group was the only winner in this price war disguised as a trade-in program competition.
And then Chunha Group, not content with increasing the trade-in value by 1.5 times, raised it again to 1.8 times and further lowered the price of used appliances.
Saseong and MG, facing losses, hurriedly requested a truce.
“I told you, I’m not interested,” I said to the Saseong Electronics CEO on the phone.
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Please, CEO Park, this is going too far. You’re crashing the market!
I picked my nose. “What am I supposed to do? The price is falling because of the increased supply of used appliances.”
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Then what about Daehoo increasing their trade-in value?
“We’re also losing money. We’re doing this to improve Daehoo’s image.”
It was true that the price of used appliances in the overseas market had fallen due to the increased supply from Korea, and we were losing money by offering higher trade-in values.
But the loss was negligible, easily offset by our profit margin on new appliances.
“Our market share isn’t increasing because Saseong keeps matching our trade-in value. I’ll double it if you keep this up.”
The Saseong CEO was speechless.
I could even increase the trade-in value by 2.5 times if I was willing to sacrifice the profit margin on new appliances.
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…Are you serious?
“You’re testing my patience again. Should I double it? Do you think I can’t?”
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Ugh…
I smiled. “And CEO, do you think we’re equals?”
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What?
“I’m the chairman of Chunha Group. I’m also the CEO of Chunha Electronics, but you should be talking to our chairman, not me.”
It was arrogant of me to consider Chunha Group, ranked 17th in the business world after acquiring two Daehoo subsidiaries, equal to Saseong Group, the number one conglomerate.
Saseong Electronics alone was among the top 10 companies in terms of sales.
But I wasn’t wrong.
I was the chairman, and he was just a CEO.
And if we included the Chinese department store, Chunha Group was even larger.
“Anyway, I’m not changing my strategy. Stop following me. You’ll only lose more money.”