Coupang's agony deepens amid snowballing deficits
Coupang founder and CEO Kim Bom poses in this 2019 file photo. / Courtesy of Coupang
By Kim Jae-heun
As the novel coronavirus situation prolongs in and outside of the country, Korea's largest online retailer Coupang's woes are increasing.
Despite the soaring number of customers shopping with Coupang, its business model is yet to yield a fair amount of return. To make the situation worse, its current best-selling items are those that create the lowest profit.
Coupang has become the most highlighted retailer both on and offline after the outbreak of COVID-19 here.
According to the retail business analyzing service WISEAPP/WISERETAIL, people spent 1.63 trillion won on Coupang last month, which is up by 190 billion won from January. It is the largest increase in a month among e-commerce firms.
The increase in sales can be attributed to the virus situation here, as shoppers have increasingly been turning to online shopping instead of visiting supermarkets. The jump in online sales is likely to continue as the coronavirus is still spreading.
However, the online retailer has not felt the benefit as its 3 trillion won ($2.46 billion) deficit remains.
The e-commerce giant has been offering various promotions to attract as many customers as it can, one of which is an unlimited free delivery service for those who pay for a 2,900 won monthly premium membership.
On Jan. 28, Coupang set a new record by sending over 3.3 million orders in one day. Since then, it has been maintaining a deliver average of 3 million daily orders.
However, items that have been significantly in demand are daily necessities like instant noodles, rice and water ― items that have the lowest profit margin for Coupang.
Face masks and hand sanitizers are other items that are selling fast on the online platform, but Coupang froze their prices, which is causing it losses considering the delivery cost.
Researcher Lee Jin-hyup at Yuanta Securities Korea said Coupang is one of the beneficiaries of COVID-19, but the skyrocketing number of orders has not helped as their business model fails to pursue profit.
Lee said E-mart and Lotte Shopping's online platforms have better competitiveness in items' prices and their delivery services can become the ultimate winners.
Coupang may also seek to consolidate the market by purchasing prominent rival eBay Korea.
Local brokerage Hana Daetoo Securities released a report stating that Coupang has plans to acquire major stakes in eBay Korea as it seeks to grow its entire corporate volume before a possible initial public offering (IPO) on the Nasdaq.
It says Coupang's biggest stakeholder, SoftBank Vision Fund, may acquire a controlling stake in eBay Korea, which was up for sale, to receive more funding from investors during the firm's IPO. However, eBay Korea denied the plan.