A slew of Korean online luxury retailers have capped last year with sharp falls in their profits as consumers have begun returning in-store while competition among online malls grow fierce.

Korean luxury goods platform Must-it's operating losses widened by 68 percent on-year to 16.8 billion won ($12.9 million), according to the firm's regulatory filing on Friday.

Other Korean major platforms also were in the red in 2022, with Korean luxury goods retailer Balaan seeing its operating losses double to 37.3 billion won last year. Korean luxury goods seller Trenbe also posted an operating loss of 20.7 billion won, along with a 8 percent decrease in its consolidated sales, last year.

The number of users for major online luxury retailers also dropped significantly, according to an analysis by industry tracker WiseApp. As of January, the number of monthly active users for Trenbe, Balaan, Must-it and OK Mall recorded 860,000, a 33 percent decrease from the same period in 2022.

Industry insiders say the decline in the online luxury retail business comes as the demand for offline purchases of luxury goods soared with the pandemic entering the endemic phase. Counterfeit sales incidents also fanned distrust over luxury goods sold online.

"Due to the nature of luxury goods, there's always desire to check the product with one's own eyes (when buying luxury goods)," said an industry insider on the condition of anonymity.

"With the pandemic easing, naturally, we expected the offline sales of luxury goods to increase."

He added that issues such as Naver’s online reselling platform, Kream, admitting to selling fake Essentials T-shirts through Musinsa have further reinforced a need for customers to check the goods in person before making purchases.

Also, he added that major Korean e-commerce channels have expanded their own lineup to include sales of luxury items, intensifying competition in the already saturated market for luxury goods online.

"Shinsegae Group's e-commerce platform SSG.com has recently opened a pop-up store to sell Chanel watches. Lotte On has also signed a contract with LVMH Group. Major retailers are expanding their business to retail luxury goods online, and, with their services and credibility, it will be hard for online luxury platforms to compete (with them)," he said.