Kim Byung Wook (Bundang Eul), a member of the Standing Committee for Education, Culture, Sports, and Tourism in the National Assembly, urged public institutions to stop copying the business models of private startup companies and to stop entering the market. This was a response to a large number of public institutions such as the Korean Tourist Organization and the city of Seoul entering the travel goods sales platform for Foreign Independent Tours (FIT), which endangers the startup businesses that created the ecosystem for travel goods sales 4 to 5 years ago.
On November 1st, 2016, the city of Seoul opened an online shopping market called, “One More Trip,” with a budget of KRW 490 million (USD 433,000), targeting foreign tourists who want the experience of living in Seoul. The city of Seoul stated that the aim of this business, beyond giving tourists experiences to improve their time in Soul, was to open the market for small tourist goods suppliers (travel agencies, sightseeing spots, experiential shops, etc.). It’s claim was that these suppliers could not develop their unique content and ideas into tourist goods because of a lack of capital and distribution channels.
However, competition is inevitable because, for 4-5 years now, private startup companies have been making FIT travel goods platforms that sell tourist goods made from small suppliers to foreigners online.
In fact, the FIT travel goods suppliers that lead the market have been supplying both the public (for example, “One More Trip” of Seoul) and the private startup companies. In the case of goods related to the DMZ tour which is popular among foreign tourists, the type and price of the products are sold similarly to private and public organizations. This leads to the competition of “One More Trip” and the existing FIT platforms of startup companies because they sell the same product to the same target (foreign independent tourists).
Furthermore, “One More Trip” of Seoul is harming the ecosystem and business models that startup companies designed by setting the commission fee at 5%, which is much lower than the original commission fee of 10-20% that was set naturally by platforms of private organizations. In addition, to attract tourists to Seoul, the city dedicates a large budget each year to advertise “One More Trip” using the Facebook page, “VisitSeoul,” which has 630,000 followers. This obviously threatens startup companies, often leading them to file civil complaints to the city of Seoul that this is unfair competition.
In June of 2017, the Korean Tourism Organization announced that they would give service to the “FIT Online Portal Site Construction and Operation Project,” which leads us to believe that the competition between public and private startup companies will become more fierce in the FIT online platform market.
As a result, private tourism start-ups that operate FIT online sales platforms oppose this project, and the KTO claims that the “FIT Online Portal Site Construction and Operation Project” is not a business that invades the private sector, but a project wherein the public and the private sector can coexist.
However, the expected result of the Request for Proposal for this project reveals that travel agencies will be able to enter without commission fees. In addition, the site requires functions for the establishment of booking and billing of tourism products for FIT and the function to see the sales history. The site blueprint also contains system designs for the reservation and payment of sightseeing products. In fact, it was revealed that they specify “One More Trip” of Seoul in the design, which basically shows that the Korean Tourism Organization was preparing their version of “One More Trip”.
Addressing this problem, Shin Sung Hyun, CEO of FunTastic Korea, claims, “It is very inefficient for public institutions to make a website worth a few hundred million won and advertise with such a high fee, when there are so many other efficient ways to promote the innovation of FIT products, to pave the way, and to help small companies. This is only an administration for exhibition.” Shin also criticized the KTO saying it should concentrate on constructing an infrastructure for tourism instead of competing with private startup companies.
Kim Byung Wook, a member of the National Assembly, says, “Public organizations should only provide support to private companies, such as providing fishery education programs, funding fishing boats, and towing them to sea, so that private companies can be the ones who catch the fish. Public organizations should not make ships to catch fishes themselves.” He also emphasized that “the President Moon Administration will do its best to improve the system so that there is no venture start-up company that is harmed by the copying of platforms by public institutions and large corporations.”
This article, entitled “Kim Byung Wook at National Assembly urges to stop copying startup business models”, was written in Korean by Kim Min Jung of Platum, edited by AllTechAsia.