Coupang to change landscape of logistics market
A delivery worker sorts out parcels at Coupang's logistics center in Songpa District, southeastern Seoul, on Sept. 11, 2020. / Yonhap
By Kim Jae-heun
By Kim Jae-heun
Coupang recently got the green light to run its own logistics business. With the approval from the Ministry of Land, Infrastructure and Transport, the company will start by delivering products sold through its own online service. But once Coupang starts delivering parcels for other companies and customers, the landscape of Korea's highly competitive logistics market is expected to undergo major changes.
Currently, CJ Logistics is in the lead accounting for a 47 percent market share. Coming in next are Lotte Logistics and Hanjin Logistics each with a 13 percent market share. CJ has reigned at the top for nearly eight years, leaving rivals with little chance to threaten its dominance.
Coupang forayed into the Korean parcel-delivery market in 2018, but dropped out after just a year because it could not cope with the surging volume of parcels.
The e-commerce unicorn already has enough parcels to handle through its own online service and was not able to handle orders from other clients.
But Coupang has been spending big to handle more volume, hoping to grab a bigger slice of Korea's burgeoning parcel-delivery market.
Coupang invested 485 billion won to automate its facilities and turned to artificial intelligence technology to boost delivery volume to nearly 500 million parcels per year.
An important point is what form of employment contract Coupang will offer to delivery workers.
Other players in the market outsource their parcel-delivery service to independent contractors. This frees logistics firms from taking any responsibility for accidents, while offering more profit to delivery workers.
However, revelations of the poor working conditions of delivery workers became a huge controversy after a number of them died from overwork. This prompted Coupang to offer to hire them directly and make sure they work 52 hours a week, which is the mandatory cap set by the government, and also provide employment insurance. It also promised at least 15 days of vacation a year and to cover fuel expenses as well as mobile phone fees.
Delivery workers who do not want to be hired directly by Coupang are free to continue working as independent contractors, the online retail giant said.
Coupang has been investing heavily into new businesses to raise its market share early on. This time too, Coupang should be able to offer dealers attractive discounts.
“Coupang has been giving out free e-coupons and big discounts whenever it enters new market to increase its share. Lured by such benefits, dealers in the open market are highly likely to choose Coupang's logistics service instead of others,” an industry source said.
Industry watchers say the only remaining variable is whether Coupang has the money to do that. At the end of 2019, Coupang only had 806.7 billion won left from all of the investments it made.
Coupang is also planning to launch a new over-the-top (OTT) service this year, which is expected to entail initial marketing expenses.
But a Coupang official said the company will take things a step at a time.
“We will focus on delivering products directly purchased by our company. Once we settle down, we can expand to cover third-party delivery,” a Coupang official said.