Revisiting the rise of Coupang ahead of NYSE debut

Coupang has been in the headlines ever since it filed for an initial public offering on the New York Stock Exchange last month, generating speculation over its value.

When it is Thursday in the US, Coupang will be listed on the New York Stock Exchange at $35 per share, the company announced Thursday (Seoul time). It is the biggest IPO debut for any foreign company since Alibaba.

At home it is the second-largest e-commerce platform, trailing only Naver, the country’s internet conglomerate, which can be likened to Google. The country’s biggest web portal, search engine and platform operator, Naver also runs its own open market service.

According to app analytics firm WiseApp, South Koreans spent 2.8 trillion won ($2.46 billion) on Naver and 2.4 trillion won on Coupang.

In a filing with the US Securities and Exchange Commission submitted last month, Coupang revealed its total net revenues stood at $12 billion in 2020, a 90.8 percent year-on-year jump. Its gross profit stood at $2.0 billion in 2020, up 92.3 percent from 2019, while it posted an operating loss of $0.5 billion in 2020, down from $0.6 billion from a year earlier.

Though the company is still posting a loss, it has previously defended this as part of its growth strategy. Its sales have also grown exponentially since it was founded in 2010 with capital of 3 billion won.

Rocket Delivery, rocket growth

In 2014, Coupang introduced its next-day Rocket Delivery service after establishing an extensive distribution network, becoming the first e-commerce platform in the country to have its own delivery system.

The following year the company posted 1.13 trillion won in sales, nearly a threefold increase from its 2014 figure of 348 billion won.

Coupang continued to revolutionize the industry over the years as it rolled out one new service after another such as dawn delivery and same-day delivery, delivering millions of items every day including fresh groceries within hours.

The e-commerce giant’s move has made next-day delivery an industry norm, pushing its competitors to speed up their delivery times.

As if that wasn’t enough, CEO Kim Bom-suk said in 2020 that he wants to build a world where people “cannot fathom living without Coupang.”

To achieve that goal, the company built what it describes as a “seamless infrastructure network” to deliver a “superior e-commerce experience.”

It currently boasts the largest directly employed delivery fleet in the country, consisting of over 15,000 full-time drivers as of the end of last year, with 70 percent of the population living within 11.2 kilometers of a Coupang logistics center.

As of 2019, the e-commerce giant said some 34 million people were within its 10-minute delivery zone -- up more than tenfold from 2014, when the number stood at 2.59 million. Over the same period, the number of its logistics centers grew from 27 to 168.

The company’s operational infrastructure spans more than 2.3 million square meters across more than 30 cities -- the equivalent of over 400 football fields.

In December it launched Coupang Play, a service that provides unlimited streaming for premium members in a move that some saw as an effort to improve customer loyalty.

For 2,900 won per month, users can enjoy major Hollywood movies and popular domestic reality television shows as well as live soccer matches featuring Tottenham star Son Heung-min.

Growing competition in the market

Coupang’s US stock market debut comes at a time when the country’s e-commerce industry is experiencing a structural shift.

Speculation is growing over the sale of eBay Korea, which operates some of the major e-commerce platforms in the country, including Gmarket, Auction and G9.

The Korean unit of the American e-commerce giant once boasted a market share of 86 percent but fell behind over the years. In 2019 it fell to third place with a 12 percent market share -- an estimate based on data from Statistics Korea.

Potential buyers include Kakao, which operates leading messenger app Kakao Talk and search engine Daum, as well as retail giants Shinsegae and Lotte, which are seeking opportunities to bolster their online presence.

Reports emerged this week that Naver and grocery chain operator E-mart are forming an alliance through a swap of shares worth 250 billion won to expand their presence in the e-commerce industry, though the final decision has yet to be made.

In a report, equity analyst Oh Li-na at eBEST Investment & Securities said the move could make the first all-round model in e-commerce.

“If E-mart and Naver swap shares, it will become first all-round model in the e-commerce industry encompassing online and offline sales, building an offline logistics foothold and last mile delivery,” Oh said.

In February, reports citing industry sources revealed that Naver and CJ Logistics were working on express shipping services, including same-day delivery.

Last year, Naver signed a share swap deal with parcel delivery company CJ Logistics, paving the way for collaboration on content and e-commerce.

By Yim Hyun-su  (hyunsu@heraldcorp.com)