Coupang still facing profitability, labor issues
A truck in Seoul carries a message, May 14, urging punishment for Coupang that allegedly killed its worker from overworking. Korea Times file
By Kim Jae-heun
Profitability has been a major concern for Coupang since its New York listing, as Wall Street investors have been dissatisfied by its snowballing debt caused by a rapid expansion in operations.
Coupang's core business model looks appealing, because it is positioned to benefit from the “network effect,” in which the value of a product or platform increases due to the rising number of customers which causes the network itself to grow.
At the time of its New York listing, Coupang's stock price surpassed $60 briefly. However, the shares have been trading below $30 in recent months. That shows its focus on maximizing its market share and corporate size, rather than net income and operating margins, has been ineffective at least in the eyes of investors.
Some industry insiders even advised Coupang to rethink its growth-focused business strategy and pay more attention to improving profitability. They recommended that Coupang stop building new warehouses at major logistics spots.
Coupang's rapid expansion even led to forecasts that it could compete with existing retail giants, such as Lotte and Shinsegae, after its New York listing in March of this year.
However, what's more of a concern is that Coupang has been grappling with labor issues. Seven Coupang employees and two from its subcontractors have died of cardiovascular ailments, according to news reports. The Committee for Coupang Workers' Human Rights and Health alleged that five of the nine workplace fatalities were due to overworking.
Firefighters walk out of Coupang's fulfillment center in Icheon, Gyeonggi Province, where a fire broke out in June. Yonhap
Coupang's key strength of fast deliveries is only possible due to long hours logged by its delivery workers.
For the third quarter of this year, Coupang's cumulative losses increased by $100 million to reach $315 million, up 45.7 percent from the $216 million loss the retailer reported a year ago. Sales during the same period surged 48 percent to a record $46 million.
Coupang plans to build more fulfillment centers. Industry officials said chances are quite slim that Coupang will drop its growth-focused business strategy, because the protracted COVID-19 pandemic is accelerating moves by other top retailers to focus more on digitization.
For example, Naver and Shinsegae formed a business partnership aimed at preventing Coupang from dominating the market, according to analysts. Shinsegae took over eBay Korea to increase its market share by 15 percent, now being only 2 percent behind top-ranked Naver. Coupang was third with a 13 percent market share.