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Have you ever tried buying or selling secondhand items? Many people engage in secondhand transactions because sellers can get rid of unused items and buyers can purchase goods at affordable prices. If you've ever participated in secondhand transactions, you may have heard of a platform called "Carrot Market." Established in 2015, Carrot Market has seen significant growth, currently boasting 1.8 million monthly active users, which accounts for 35% of the total population. As of 2022, its revenue reached 49.9 billion KRW with a growth rate of 94.3%. However, despite this impressive growth, the company has reportedly never turned a profit in its eight-year history since its founding. While achieving substantial revenue of 49.9 billion KRW, Carrot Market has been operating at a loss of -55.6 billion KRW. The primary reason for this continuous deficit is the lack of a sustainable revenue structure. In this article, we'll explore why Carrot Market is unable to generate profits and discuss potential strategies for improvement amidst these financial challenges.
The Reasons for Carrot Market's Deficit
Launched in 2015, Carrot Market was recognized as a unicorn company with a corporate value of 3 trillion won in 2021. However, it has continued to operate at a deficit for eight consecutive years. The main reason for Carrot Market's deficit is its weak revenue structure. Competitors such as "Baemin Market" and "Joonggonara" impose transaction fees for safe transactions, while "Carrot Market" does not charge transaction fees. The only source of revenue is through "advertising." Last year, advertising revenue accounted for 99.2% of Carrot Market's total revenue. Although "Baemin Market" and "Joonggonara" impose transaction fees, they also operate at a deficit. Finding profitability in the second-hand trading platform industry is challenging. Therefore, these platforms often expand into other businesses based on their platforms. Taking "Baemin Market" as an example, in 2021, it opened offline stores selling sneakers, the main item of "Baemin Market" transactions. At these stores, customers can find over 300 limited edition sneakers. So, how is Carrot Market dealing with such deficits?
The Transformation of Carrot Market
In this situation, Carrot Market has introduced the following revenue improvement strategy: transforming from a second-hand trading platform into a local community. To achieve this, Carrot Market changed its service name from Carrot Market to just Carrot and offered various local services. Hwang Doyeon, the CEO of Carrot Market, stated, "With Carrot, we will create new value and innovation in various areas of the local community, allowing people to enjoy a richer neighborhood life." A similar example is Nextdoor, a local-based app in the United States, which gathers users through local communities and expands its services to include second-hand trading, local events, and real estate. Another familiar example is KakaoTalk, which started as a free messaging app but expanded its business into various fields such as banking, taxi services, and games.
Started as a second-hand trading platform, Carrot Market has evolved into a local community where users can now access local news, gather for events, and discover neighborhood restaurants, among other things. With this transformation, the increase in revenue has outpaced the rise in operating costs. Carrot Market anticipates reaching its break-even point relatively quickly with this growth momentum. The Carrot Market's groundbreaking marketing strategy, as outlined above, despite being entangled in current deficits, draws attention to its potential future growth in the realm of social commerce, mingling uncertainty with hope simultaneously.
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