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| Coupang founder and CEO Kim Bom-suk stands in front of the New York Stock Exchange on March 11 last year, when the firm made its debut at the stock exchange. AP-Yonhap |
By Anna J. Park
Korea's e-commerce giant, Coupang, recorded its first-ever quarterly operating profit in the third quarter of this year, as the firm finally began see benefits from its past investments focusing on efficiently improving the firm's automated fulfillment infrastructure, logistics and machine-learning supply-chain optimization.
According to the earnings report submitted to the U.S. Securities and Exchange Commission (U.S. SEC), the company not only posted its first quarterly operating profit of 103.7 billion won ($77.4 million) in the third quarter of this year, but it also logged its record-high quarterly revenue of 6.8 trillion won, which is a 27-percent year-on-year increase.
"Revenues increased to $5.1 billion, growing 27 percent year-on-year on an FX-neutral basis and over 10 percent year-on-year on a U.S. dollar basis. This was driven by an increase in both active customers and revenue per active customer. We generated over $1.2 billion in gross profit, with a record 24.2-percent gross margin, representing over $3.4 billion in gross profit recorded year-to-date," Kim Bom-suk, founder and CEO of Coupang, said during the firm's earnings call.
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The CEO said that the third quarter's significant profitability improvement came from both increasing economies of scale as well as tech-based infrastructure and supply chain optimization.
"While we continue to see positive impact from increasing economies of scale and margin-accretive offerings, most of the recent improvement has been the result of investments in technology, infrastructure, supply chain optimization and process innovation, including automation," the CEO explained.
Kim elaborated that the company found ways to leverage machine learning to predict changes in customer demand by region better and optimize inventory orders and placement, which was a key driver of the over 50-percent year-on-year reduction in fresh inventory losses in the third quarter. He emphasized that the firm's own technology made its supply-chain system operate in a seamless manner through the firm's integrated network.
Thanks to heightened productivity based on state-of-the-art technological advances, the company said Coupang's growth rate in the product commerce sector is four times faster than that of the entire e-commerce retail market in Korea.
Market analysts also share a bright outlook on the e-commerce giant's future in its stock moves.
"Despite the slowed growth rate in the online market in general, Coupang's open market sector is expected to continue solid growth, thanks to the firm's improved fulfilment services," Kim Myoung-joo, analyst at Korea Investment & Securities, said.
The analyst also forecasts that the company will focus on expanding its new businesses to ameliorate its profitability further, predicting that the firm could mark its turnaround in the next year.
"When considered that Coupang continues to implement its profitability-focused strategies, it is expected that the company will be able to turn around its annual operating profit in the next year," the analyst added.
Another analyst shared a similar optimistic forecast: "Coupang is the only e-commerce company in Korea that posted increases in both market share and in profitability. The company's differentiated delivery services and profitable businesses will bring the firm to obtain greater dominance in the online retail sectors," Park Jong-dae, an analyst at Hana Securities, said.
