In 2018, the company received a $2 billion investment from SoftBank Investment Advisers (UK) Limited, with the venture capital group subsequently taking a 33.1% shareholding. By operating its own distribution and logistics network, it avoids the relatively inefficient practice of sending couriers to third-party stores and restaurants. He decided to pivot once more, this time reinventing Coupang as an end-to-end shopping platform where the full customer journey was managed from desktop to door. However, he quickly pivoted to an auction-based marketplace after noticing the growing influence of eCommerce. In this article, I discuss Coupang’s latest Q results and why I think the business remains a buy, even after the almost 100% rise in share price over the past three months. A passionate writer and a business enthusiast having 6 years of industry experience in a variety of industries and functions.
- Coupang operates the only major payment experience in its home market, supporting a “one-tap” experience without additional verification.
- Owing to strong Q2 results, Coupang raised its FY22 adjusted EBITDA guidance from a loss of ($400m) to positive adjusted EBITDA.
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- The company also bumped up the number of shares it is offering because of strong demand by 10 million, for a total of 130 million shares.
Big losses in any quarter are a part of the operation of larger companies. Coupang invested heavily in its own logistics infrastructure when it launched a decade ago, but now also partners with third-party providers in South Korea. It remains to be seen what kind of fulfillment model it will decide on in Japan and Taiwan. The company hasn’t announced what its next market is, but it has been hiring in Singapore for lead operations, retail and logistics roles. Coupang in January was hit with a wave of disruptions to its supply chain, prices and logistics capacity, fueled by widespread panic buying, the company said. On top of that, it faced an outbreak of coronavirus cases at a warehouse near Seoul, fueling concerns that it failed to enact adequate safety measures.
Total e-commerce spending was $128 billion in 2019, which is expected to grow to $206 billion by 2024, implying a CAGR of approximately 10%.48 Total e-commerce spend for all Internet buyers in Korea. Although Coupang sounds like one of the richest companies in the world, the overhead and debt costs take down the bottom line of revenues. When sales jumped sharply toward the end of the year, the net loss was taken down substantially to $567.6 million.
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They provide millions of items for sale and maintain record delivery speeds when compared to most other online retailers. It’s no small wonder that Coupang is one of the fastest-growing e-commerce retailers in the world today. Coupang has expanded its operations from South Korea to other parts of the world. Although the sales are limited to the country of South Korea, Coupang has extended an invitation for sellers from all over the world to use the site. Coupang offers a marketplace for global sellers to encourage international businesses to sell their products and services on Coupang.
- Coupang’s founder and CEO Bom Kim has already transformed his company multiple times over the past decade, and it still has a lot of growth potential in its current form.
- Coupang, a start-up founded by a Harvard Business School dropout, helped transform e-commerce in South Korea, one of the world’s fastest-growing markets for online shopping.
- Although Coupang sounds like one of the richest companies in the world, the overhead and debt costs take down the bottom line of revenues.
- Additionally, numerous smaller e-commerce businesses, as well as traditional brick-and-mortar retailers venturing into the online shopping realm, contribute to the competitive landscape that Coupang operates in.
- Only a few start-ups — like Naver, South Korea’s dominant web portal and search engine, and Kakao, its leading messaging app and online bank — have been as successful as Coupang.
- Starting with the Value Proposition, Coupang offers its customers a vast array of products and services under one platform, which includes electronics, fashion, groceries, and lifestyle items.
In Q2 2022, Coupang reported a gross margin of 22.9%, up from 20.4% in Q and 18.2% in Q (excludes the impact of the fire at one of its fulfilment centers). As a result, Coupang’s gross profit in Q2 increased 41% YoY (excluding the fire) or 75% YoY (including the impact of the fire which suppressed Q gross margin), substantially outpacing its revenue growth rates. Net other revenue also includes consideration from online restaurant ordering and delivery services performed by Coupang and advertising services provided on its apps or websites. Net retail sales represent most (~90%) of the net revenues Coupang earns from online product sales of its owned inventory to customers. Net other revenue includes commissions earned from merchants selling their products through Coupang’s apps or websites. Coupang is not the merchant of record in these transactions, nor does it take possession of the related inventory.
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Some of its major competitors include eBay Korea, which operates popular platforms such as Gmarket and Auction, and 11st Street, another prominent online marketplace in South Korea. Apart from these, Coupang also competes with Naver Shopping, a leading search engine in the country that offers integrated shopping services, and WeMakePrice, known for providing daily deals and discount offers. Additionally, numerous smaller e-commerce businesses, as well as traditional brick-and-mortar retailers venturing sugar trading into the online shopping realm, contribute to the competitive landscape that Coupang operates in. One of the main concerns I had about Coupang (at least prior to this quarter) was its horrific adjusted EBITDA margins in developing offerings, such as food delivery and video streaming. Instead, Coupang’s main lever to drive revenue growth over the coming 3-5 years will be increasing penetration of its new products (e.g., food delivery, advertising, payments) within its existing customer base.
What does Coupang do How does Coupang work Business Model
This is one of the ways that Coupang shows its customer-centric side. It goes over and above to ensure that the navigation and purchasing processes flow smoothly. Coupang is reimagining the commerce experience with the goal of wowing each customer
from the instant they open the Coupang app to the moment an order is delivered to their door.
What’s more, Coupang’s established logistics network has allowed it to expand into food delivery with relative ease. Coupang, a leading e-commerce company in South Korea, has rapidly grown and established itself as a key player in the industry since its inception in 2010. A SWOT analysis of Coupang reveals both its strong competitive advantages in the market and the potential areas for improvement or vulnerabilities it faces.
Coupang Play
Coupang had secured the confidence in these big players in the financial industry. As it expands into more product categories, it will also compete with e-commerce platforms like Momo and PChome, which both offer 24-hour deliveries. In South Korea, Coupang’s e-commerce platform offers millions of products. Its other services include Rocket Fresh for perishable groceries and Coupang Eats for meals. That has helped to push Coupang’s asking price for a share higher, from the initial range of between $27 and $30, to between $32 and $34, and now $35 each.
While it’s not good for the local economy, it certainly has served to boost the use of the only e-commerce business in the country. The market size increased from 181 percent emergency dramatically to 24.6 percent within 12 months. This was when the virus was at its height and people were living under strict stay-at-home orders from the local governments.
Coupang, a South Korean e-commerce company, follows a unique and highly efficient business model. By analyzing it through the lens of the Business Model Canvas framework, we can break down its various components to better understand its core mechanisms and drivers. Growth has also not been our priority this past quarter, as we mentioned in our last call…
Despite 1P being a harder problem to solve, we chose to invest in 1P before 3P because we believe 1P leadership is the foundation for providing the best overall experience, including the best 3P offering in the market. By breaking the trade-offs across price, service, nvidia stock forecast and selection, our superior 1P offering attracts more and more customers to make Coupang its default shopping destination. This increased traffic leads into more sales for 3P which attracts more 3P sellers, who further expand the selection on Coupang.
Coupang’s core business is still growing
“At the moment, fairly or unfairly, that’s where SoftBank is, and I think it kind of contaminates every company it’s invested in.” Coupang is said to be valued at $9 billion and has drawn $3.4 billion in venture capital funding to date, including an investment of $2 billion in 2018 by SoftBank’s Vision Fund and $1 billion in 2015 by SoftBank itself. The company says 70% of Koreans live within 10 minutes of a Coupang logistics center, making last-mile delivery easier to achieve. It’s also helped by the fact that South Korea is one of the world’s most densely populated countries. Like Facebook’s Mark Zuckerberg, Coupang’s founder and CEO Bom Suk Kim will hold all of the company’s outstanding Class B shares.
