Market Kurly hit by falling profits, mounting competition

Market Kurly CEO Sophie Kim / Courtesy of Market Kurly

By Kwak Yeon-soo

Market Kurly, an online grocery delivery startup, is facing growing questions over its sustainability as it continues to lose money on soaring labor and other operating costs, according to industry analysts Wednesday.

The company has also been struggling with intensifying competition from e-commerce companies and traditional retailers that have been rushing to roll out “dawn delivery” services, chipping away at its shares in the rapidly growing fresh food delivery market.

Given its increasing operating losses year after year, the question has been raised whether Kurly, operator of Market Kurly, can sustain its business in the long-run.

Graph by Bae So-young

According to the data compiled by the Financial Supervisory Service (FSS), Kurly lost 33.7 billion won ($28.76 million) in 2018, up from 12.4 billion won in 2017.

The size of its operating loss has increased over the past four years, forcing it to gain investments to finance its operations. In April, the company received 100 billion won in funding.

However, industry officials say the output is questionable as it lacks the capacity to generate profits.

“Although customers are satisfied with Market Kurly's unique curation and overall quality of fresh foods, the company is suffering large losses,” said an industry official, who declined to be named.

“It could withstand the intensifying competition in the short term thanks to capital investment, but I'm not sure about its sustainability because big companies are trying to distort the market and drive out competitors.”

Another industry official said Market Kurly needs to better manage inventory.

“Market Kurly maintains low inventories, and this is why many consumers complain that they can't buy goods because they're out of stock at around 11 p.m. Consumers are likely to change their grocery-delivering platforms and look for alternatives,” the official said.

In 2016, Coupang rolled out Rocket Fresh, which ensures delivery of some 4,200 fresh food and other items by 7 a.m. the next day.

SSG.com, the online shopping mall of Shinsegae Group, rolled out its dawn delivery service in June, betting on the fast-growing online delivery market of fresh goods.

Home shopping companies, including Hyundai, Lotte and GS, also joined the dawn delivery fresh food delivery race.

Despite increasingly unfavorable business conditions, Market Kurly said the company will keep expanding its presence in the e-commerce market.

“We are in good shape so far, and well underway to expanding our size. Losing money is not our biggest concern at the moment. We will invest in building logistics and delivery centers and providing differentiated services to our customers,” said a Market Kurly spokesperson.

Founded in 2014, Market Kurly ensures all orders placed by 11 p.m. are delivered before 7 a.m. the next day, prioritizing convenience over cost savings and focusing on own-brand groceries.

This distinguishes the company from competing retail giants, which use a marketplace platform or subsidiaries to connect retailers and consumers.