ANALYSIS Coupang's 'Korea strategy' was just a short-term goal

By Kim Yoo-chul

Coupang made a successful debut on the New York Stock Exchange Thursday, with a spike in trading on the first day of its listing, boosting the market capitalization of the e-commerce company to $84.5 billion based on a total of 130 million shares offered.

Coupang shares began trading at $63.5 per share, up 81.4 percent from the initial public offering (IPO) price, set at $35, and finished the first day at $49.25, up 40.71 percent from the IPO price.

Wall Street investors said the explosive market response reflects expectations over the e-commerce company's growth. But they added that recent concerns over Coupang's workplace conditions in Korea, where the company is headquartered, remain as its biggest challenge.

Coupang founder Kim Bum-sok seems to have acknowledged such concerns. He said Coupang plans to focus more on stabilizing its delivery-related systems and having more of its logistics centers be based in Korea rather than pursuing further external growth via additional corporate acquisitions.

“Coupang will be aggressive, and this is what we've been doing so far. We will invest in services, which will help differentiate us on the basis of innovative products. We will try to create more jobs, and specifically, Coupang has plans to help revitalize regional economies,” Kim told reporters on the sidelines, as he attended the first day of trading on the NYSE. Coupang plans to hire 50,000 more workers over the course of the next five years.

But Kim said that Coupang will take a cautious approach when it comes to acquiring Yogiyo, one of Korea's top food-delivery services.

“I don't want to say Coupang won't explore all acquisition possibilities. However, we won't do that unless we reach the right judgment through tons of analysis. Because South Korea is a market that hasn't been widely touched by Amazon and Alibaba, we can't underestimate the growth potential of the Korean market.”

Sources in the local investment banking industry said that those remarks are also a “mild confirmation” of Coupang's intention not to join the bidding process for a stake in eBay. Coupang was tapped as one of the candidates to acquire a controlling stake in eBay. EBay put its South Korean unit up for sale, which is valued at around 5 trillion won.

Kakao and MBK Partners are considered to be the other viable candidates that have shown interest in purchasing controlling stakes in Korea's largest online platform, which consists of three separate business units ― including Gmarket and eBay Auction ― the sources said.

“Coupang has shifted its strategy toward fine-tuning its delivery service technology and building more fulfillment centers in Korea, to actively tackle more labor issues and further boost the level of its core competency in businesses it's been involved in. I would say a lot of work needs to be done to enhance the current delivery model to attract more Wall Street investors,” a senior fund manager at a Europe-based investment bank in Seoul said by telephone.

Coupang has become hugely popular in Korea for its signature Rocket Delivery service, which lets customers enjoy free shipping with products brought to their doorsteps within hours or the very next day. But the company has been facing increased criticism in Korea over its “controversial” working conditions. Some say the recent deaths of two Coupang delivery workers were linked to its poor working conditions. Coupang responded by saying it will do its best to create a safer working environment.

The fund manager, who said has invested “a few million dollars” into the country's e-commerce stocks, added that Coupang is considering an expansion of its logistics centers in Korea to seven, while planning to explore ways to strengthen its delivery service through Coupang Eats, as well as add OTT-oriented services, and to widen the range of fresh food items it delivers.

“We have to be aware that Coupang will seek further stability of its core service products in Korea before applying them to its other target regions, such as North America and Asia,” the manager said.

On a related note, after Coupang's IPO, smaller rival Market Kurly said it was considering a U.S. listing by the end of this year, at the earliest.

Market Kurly was in talks with major investment banks to go public before the end of this year, after the startup raised over 400 billion won through five previous rounds of funding.