[Click eStock] "Coupang, Profitability Improvement Due to Delivery Unit Price Decline... Turnaround to Profit Within 3 Years"

Mirae Asset Daewoo Report
Significant Profit Improvement Expected Next Year

[Asia Economy Reporter Minji Lee] Mirae Asset Daewoo forecasted that Coupang is highly likely to turn profitable within 2 to 3 years due to a decline in delivery unit costs and an increase in open market commission fees.

According to Mirae Asset Daewoo on the 25th, Coupang's expected sales revenue this year is 11.443 trillion KRW. Operating loss is expected to be 628 billion KRW. It is estimated that about 500 billion KRW in costs were incurred this year in response to the novel coronavirus disease (COVID-19). Nevertheless, the operating loss is expected to have decreased compared to 2018 (1.128 trillion KRW) and 2019 (720.5 billion KRW).

However, starting next year, Coupang is expected to make significant improvements in its deficit. Researcher Kim Myung-joo said, "This is due to the continued decline in delivery unit costs from increased logistics volume and the rise in revenue from open market commission fees," adding, "The possibility of turning profitable within 2 to 3 years is also high." According to estimates, logistics volume is expected to have grown by 55.9% compared to the previous year this year. Next year's logistics volume is predicted to grow by 32.1%.

Coupang is expected to strengthen its open market based on fulfillment (a logistics specialist company selecting, packing, and delivering products on behalf of sellers according to orders). If Coupang secures delivery business qualifications, it is likely to provide fulfillment services. The reason for reapplying for the license is that the increase in logistics volume has led to higher delivery density and improved dispatch efficiency, significantly enhancing the efficiency of "Kuchin" (Coupang delivery workers). Researcher Kim Myung-joo said, "Since last July, Coupang has been practically providing fulfillment services to open market sellers," adding, "Next year, Coupang will be a key player in strengthening open market competitiveness and reshaping the online market."

Next year, Coupang also plans to strengthen categories centered on fashion. The strengthening of Coupang's direct purchase categories next year is likely to focus on fashion rather than food, which has a high disposal burden and requires offline infrastructure. This is because the online penetration rate in the apparel sector is lower than the market average, and the intermediate profit margin is high. Coupang is already expanding its fashion categories through C Avenue and others. The SKUs eligible for Rocket Delivery are also continuously expanding.

Furthermore, if Coupang enters OTT and live commerce, additional profitability improvements are expected. Next year, the company plans to expand Rocket Wow services such as OTT, aiming to increase purchase frequency through improved existing customer loyalty and raise logistics volume by acquiring additional new customers, which is expected to lead to a decline in delivery unit costs.

Coupang's market share is expected to increase from 13.3% this year to 15.7% next year. The possibility of turning profitable within 2 to 3 years is high. Researcher Kim said, "Coupang is currently the number one standalone commerce platform," adding, "By enhancing Coupang's competitiveness in the online market, additional fundraising and listing of Coupang are both fully possible."