Social commerce reducing delivery service

By Park Jae-hyuk

Social commerce companies have been reducing the quality of their services in the face of continuous deficits.

Coupang, one of Korea’s three largest social commerce firms, raised the lower limit of purchases for its Rocket Delivery service from 9,800 won ($8.7) to 19,800 won ($17.6), Tuesday, without prior notice. This was the first hike since the company introduced the service in March 2014.

Rocket Delivery offers free-of-charge delivery of parcels in one day. Products directly purchased by Coupang are sold through the Rocket Delivery service.

Coupang said the lower limit of purchase for its slower regular delivery service will remain at 9,800 won as before, but customers complained on several online communities, criticizing the sudden price hike.

WeMakePrice, one of Coupang’s rivals, also announced recently that it would end its “97 Free Delivery Promotion” service. The company had offered free delivery for purchases over 9,700 won.

The social commerce company introduced the service in 2013 in order to compete with its rivals as a second mover. Coupang and Ticket Monster (TMON) already offered free delivery for customers purchasing items priced over 9,800 won at the time.

TMON, Korea’s top social commerce company, alone keeps remaining its lower limit for free delivery service as before.

The recent downgrading of the service was mainly due to continuous deficits caused by intensifying competition in e-commerce, according to industry sources.

The Ministry of Trade, Industry and Energy said Monday that the growth rate of the three social commerce companies’ sales from May to August has been left behind by that of open market companies, such as Gmarket, Auction, 11st and Interpark.

Although social commerce companies had been growing faster than open market companies before, this has been reversed since May and the gap has been widening. In July, open market companies grew 31.2 percent month-on-month, while social commerce companies grew only 1.2 percent.

In 2015, sales of the three social commerce companies were 1.5 trillion won ($1.3 billion), while their total operating loss was 830 billion won. Coupang’s operating loss last year was 547 billion won.