'Efficient' Rocket Delivery Strengthens Market Dominance
Sales Surpass 7 Trillion Won... Exceeding Existing Large Marts
Operating Loss Decreases for the First Time Since Earnings Disclosure
[Asia Economy Reporter Minwoo Lee] Sales surpass 7 trillion KRW, deficit reduced by 34%... Coupang says, "See? I'm not going bankrupt"
Last year, Coupang's sales exceeded an all-time high of 7 trillion KRW, surpassing the annual sales of Lotte Mart. The deficit, which had been increasing every year, also decreased by more than 30%. It appears that the establishment of 'economies of scale' through Rocket Delivery helped reduce fixed costs. With the ongoing atmosphere of refraining from outdoor activities due to the novel coronavirus disease (COVID-19), there are expectations that growth will accelerate even further this year.
On the 14th, Coupang announced that its consolidated sales for last year reached 7.153 trillion KRW, with an operating loss of 720.5 billion KRW. Sales increased by 64.2% compared to the previous year, significantly exceeding the market forecast of 6 trillion KRW. This surpassed the 6.3306 trillion KRW sales of Lotte Mart, considered one of the 'Big 3' large marts. For the first time since it began disclosing performance in 2014, the scale of operating losses also decreased, dropping 36.1% from 1.1279 trillion KRW the previous year.
The 'Rocket Delivery' service, which delivers orders placed before midnight the same day by the next day, is credited as the main driver of growth. The number of Rocket Delivery centers increased from 27 in 2014 to 168 last year, and the number of customers within the 'Rocket Delivery living zone' (within 10 minutes of a center) grew thirteenfold from 2.59 million to 34 million. As loyal customers accustomed to low prices and fast delivery increased, logistics operation efficiency also improved. Using artificial intelligence (AI), Coupang predicts which products will be ordered in advance, purchases them, and delivers them via the fastest route immediately after the order is placed. This was the secret behind increasing the scale of pre-purchased products from 30.3 billion KRW five years ago to 711.9 billion KRW.
Seungwoo Yoo, a researcher at SK Securities, explained, "As Rocket Delivery centers rapidly increased, it was possible to simultaneously achieve rapid sales growth and cover fixed costs. This year, with the expansion of 'homeconomy' due to COVID-19, Coupang's performance is expected to grow significantly once again."
Despite concerns related to SoftBank Chairman Masayoshi Son, who invested about 2 billion USD (approximately 2.3 trillion KRW) in Coupang in 2018, there are forecasts that there will be no issues. Questions arose as to whether Son would withdraw from Coupang because the performance of Vision Fund 1, a 10 trillion yen (approximately 113 trillion KRW) technology investment fund established by Son in 2017, sharply deteriorated. Vision Fund 1, which had accumulated investment gains of 2 trillion yen by June last year, is expected to record cumulative losses as of March this year due to the impact of COVID-19, with Indian hotel chain startup Oyo and others facing bankruptcy threats.
Researcher Yoo stated, "Based on Coupang's performance last year, there is no reason for Chairman Son to withdraw from Coupang. Despite Coupang Fulfillment Service, which manages logistics centers, not yet being launched, the company has shown potential for profitability improvement. Even if Chairman Masayoshi Son decides to divest some shares, the potential for profitability improvement is sufficient, so it is entirely reasonable to expect an IPO or additional investments from other sources."
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