Coupang urged to improve sustainability

A television monitor shows Coupang's stock price on March 15. Korea Times file

Analysts advise e-commerce giant to address labor issues for more investments

By Kim Jae-heun, Kim Yoo-chul

Despite several labor-oriented issues, it seems like business as usual for Coupang because no major investment banks are offering “sell” views on its stocks now being traded on the NYSE.

But it is notable that its share price was remaining at the $40 per share level after peaking briefly at $69 on the first trading day a month ago.

Some big institutional investors are still maintaining their bullish views on the company given its still-large opportunity to increase its market share in Korea, but they have some concerns on its valuation.

According to an analysis by The Korea Times over comments on Coupang by leading global investment banks ― Mizuho, Credit Suisse, JP Morgan, Deutsche Bank and Goldman Sachs ― only Goldman Sachs maintained a “buy” rating on Coupang and $62 as its target. The remaining four banks offered “neutral” ratings and their target prices ranged between $46 and $50, just slightly above the current level.

“Coupang's strengths lie in its competitive position in Korea's e-commerce sector thanks to its investments in terms of enhancing user experience and upgrading logistics infrastructure. While it is looking good overall, one of the key questions is how Coupang will effectively handle its labor-oriented issues,” a senior fund manager at a U.S.-based investment bank in Seoul said by telephone, Tuesday.

Coupang's core business model is simple. It has become popular in Korea because of its signature Rocket Delivery service, letting customers receive products at their doorstep within just a few hours or the very next day with no delivery costs.

“But also that means increased possibilities for Coupang to be grappling with human resources-oriented challenges. Some investors were saying that Coupang may be overvalued, although I personally think if Coupang improves the current delivery model from a labor standpoint, then more Wall Street investors will be coming in,” said another fund manager who invested a “few million dollars” in Coupang.

The labor issues surrounding Coupang have gained attention after the deaths of some couriers. While the exact reasons are unknown, local civic groups claimed the deaths were caused by “overwork.”

Coupang expressed its “deepest condolences and sympathy” recently to the deceased and the bereaved families. It also pledged to actively cooperate in the processes of determining the causes of their deaths, and will spare no efforts in providing support to relieve the pain of the bereaved families.

All of Coupang's delivery workers are under its direct management and it limits drivers' working hours to five days a week under 52 hours, which complies with the government's guidelines. Coupang said it promises employees 15 days of vacation a year and break time during their work. When they get into an accident, the company provides insurance to cover costs.

Local civic groups are planning to hold a press conference for foreign media in Seoul sometime later this month seeking to shed light on Coupang's labor-related controversies. No specific agenda has been announced.

According to sources, the United Nations' special rapporteur on human rights issues may attend the press conference.

Interestingly, JP Morgan touched on Coupang's labor issues recently by saying that the company is at the center of the “kwarosa” or “death by overwork” issue. JP Morgan also pointed that out Coupang may have to spend more money to improve employee safety and enhance welfare programs. “Kwarosa,” a Korean term referring to sudden death often due to heart failure or a stroke as a result of arduous work, is actually not a new concept in Korea.

Coupang founder Kim Bom-seok said earlier the company will invest 5 trillion won in building 100 more logistics centers in 30 cities in the country to make Rocket Delivery's service available everywhere.

“Our mission is to create a world where customers wonder, 'How did I ever live without Coupang?,” Kim said.