Emart lags behind Coupang due to overhead cost burden

Coupang's delivery trucks are parked at the company's logistics center in Seoul, in this 2021 file photo. Yonhap

By Kim Jae-heun

Emart, the country's largest discount store chain, has been lagging behind Coupang, the largest e-commerce firm, in sales and operating profits as more and more consumers shop online, according to industry officials, Tuesday. In addition, Emart is spending a huge amount of money to operate its stores, while Coupang does not have to. That means Emart cannot surpass Coupang in terms of profitability.

The e-commerce firm surpassed Emart both in sales and operating profit in the second quarter of the year. Coupang's revenue soared 21 percent year-on-year to 7.67 trillion won ($5.84 billion). Emart's sales increased only 1.7 percent over the same period to 7.27 trillion won. Coupang posted a 194 billion won operating profit, while Emart lost 53 billion won.

Emart's underperformance is mainly attributed to the company's strategic retreat that focused on renewing old stores and expanding its e-commerce business.

The large discount store market here has been suffering from sluggish sales due to an increasing demand for online shopping. As a result, Emart began to invest heavily in renewing existing stores to offer customers more than just products by featuring sporting goods shops, performance halls and other attractions that appeal to families.

Coupang's aggressive supply chain expansion also played a key role. The e-commerce firm invested nearly 6.2 trillion won since 2014 to establish logistic centers across Korea ― allowing overnight deliveries of online orders.

Shinsegae Vice Chairman Chung Yong-jin visits to Emart's renewed store in Incheon, May 3. Newsis

Coupang established such a dense logistics network that 70 percent of Korea's population lives within a 15-minute drive from the e-commerce giant's logistics centers.

“A 'lock-in effect' played a crucial role in attracting loyal customers. All of the consumers using Coupang's various services, including Coupang Eats and Coupang Play, have come to use Coupang's online shopping mall at the same time. People learned how convenient it is to buy products through Coupang than it is to shop at other retailers' stores,” an industry official said.

However, Emart believes it can reclaim the No.1 position in the second half of this year.

Its eight renewed large discount stores in Korea have already displayed about a 10-percent increase in sales since they reopened.

Emart's Kintex branch in Ilsan, Gyeonggi Province attracted about 300,000 customers just 20 days after it reopened, while sales jumped nearly 27 percent year-on-year.

“When we see the full effect of store renewals, we expect the company's overall business performance to improve in the second half of this year,” an Emart official said.