Coupang ignites price war on everyday products

A price war on everyday products is intensifying with local discount supermarket chains rushing to slash prices on select items to match those offered by online retailers.

Sparking this competition is the nation’s No. 1 e-commerce operator Coupang which has been shaking up the local retail market with the lowest prices on daily use products such as diapers, baby formula, tissues and bottled water.

Combined with its exclusive “Rocket Delivery” system -- free shipping within 24 hours by Coupang’s own deliverymen for purchase over 9,800 won ($8) -- the e-commerce giant, which started as a small deal-of-the-day start-up in 2010, has been growing at an exponential pace, alarming its off-line competitors.

Bent on curbing its soaring popularity among consumers, particularly young housewives and mothers, off-line retailers have begun offering equally high discounts on Coupang’s best-selling everyday products.

Announcing plans to offer customers the “lowest prices among all local retailers,” the nation’s top supermarket chain E-mart has started offering massive discounts on products like diapers, baby powder, feminine hygiene and shampoo products at prices below those set by the online retailer.

Coupang has reciprocated by further dropping prices below those offered by E-mart, which in turn has been responding with even lower prices -- though the price difference is marginal at 1 or 2 won at present.

With off-line competitors like Lotte Mart and e-commerce operators such as Ticketmonster and WeMakePrice joining the price war -- offering fresh bargain deals and promotional discount coupons -- the battle is continuing to expand.

At the same time, industry watchers remain uncertain over exactly how long local retailers can afford to maintain their unusually low pricing policies on products geared for daily use, which are now being sold at rates far below cost price.

“It’s essentially a chicken game over who will drop out of the race first,” said an industry insider. “Though they are sustaining huge losses, both Coupang and E-mart are reluctant to lose the ‘lowest price’ title in the market.”

Moreover, the competition may take a bigger toll on the smaller-sized Coupang, which is expected to report a record-high operating loss of about 400 billion won for 2015, despite an estimated 400 percent hike in sales from the year before.

Last year, E-mart, operated by Shinsegae Group, posted 503.8 billion won in operating profit -- though about 13.6 percent less than in 2014 -- signaling a vast gap between the two firms’ financial leeway.

By Sohn Ji-young (jys@heraldcorp.com)