In Dongdaemun area, fashion market has been growing over 100 years. During the period, the market has evolved from a basic trading place into a dynamic manufacturing and distribution network. In Dongdaemun market, there are quite important distinctive characteristics. The first one is the flexibility of supply system, which is enabled by the clustering of small-sized players such as manufacturers, wholesalers, and retailers. The second one is that of self-organizing network. Over the 100 years, no one has controlled the market strategy for the expansion, but the market itself has managed to evolve into the current form of huge and complex system. This observation implies the possibility of applying the principles of complexity science to Dongdaemun market.
In ordinary manufacturing and distribution chain, there is a main controlling player who manages the whole supply chain. Focusing on the static control variables of the leading player, we can analyze the behavior of the entire chain. In the case of Dongdaemun market, however, the unit of analysis is a dynamic network of small players, not a static centralized system. So, we try to explain the market growth from the viewpoint of complexity adaptive system. Also we use analytic models to explain the risk sharing, pricing, and profitability of wholesalers and retailers. Using extended newsboy problem models to explicitly consider the return policy alternatives and contribution margin constraints, we explain the conditions under which risk sharing arrangements among players are determined. The analytic results explain the evolutionary process of Dongdaemun market, where risk sharing between wholesalers and retailers has been changed according to the market conditions and the players’ strategies.
