Coupang 100 Trillion vs Emart 5 Trillion... Why the Market Cap Gap?

[Asia Economy Reporter Ji Yeon-jin] As Coupang successfully listed on the U.S. stock market, investors are turning their attention to the domestic retail company Emart. Emart is a large-cap stock based on market capitalization among Korean listed retail companies and is showing the most proactive moves in online business among traditional offline leaders. While Emart, listed on the Korea Exchange, has a market capitalization of less than 5 trillion won, Coupang's market cap exceeded 100 trillion won immediately after listing, raising interest in whether Emart's stock price will be re-evaluated.

According to the securities industry on the 21st, Coupang closed at $44.89 on the New York Stock Exchange on the 19th (local time), up 2.28% from the previous day. Coupang's stock price soared to $61.88 intraday on the listing day, the 11th of this month, but then declined, yet it remains above the IPO price of $35.

In contrast, Emart, the largest discount mart chain in Korea, closed at 174,000 won on the 19th, down 1.14% from the previous day, with a market capitalization of 4.8503 trillion won. Emart showed an upward trend earlier this year as a beneficiary of economic recovery following the start of COVID-19 vaccinations in the U.S. in December last year, but its recent stock price has remained in a box range.

Emart has established itself as a representative offline retail company in Korea, whereas Coupang, founded in 2011 based on an online platform, has widened the market cap gap between the two.

Last year, the domestic e-commerce market size increased by 16.7% year-on-year, surpassing 159 trillion won. Considering the decline in online travel bookings due to COVID-19, the annual growth rate is estimated to exceed 30%. However, there is no dominant number one e-commerce player in Korea like Amazon in the U.S. Seojung-yeon, a researcher at Shin Young Securities, said, "Coupang has empirically proven that it can increase market dominance through continuous capital infusion," adding, "There is great growth potential in the commerce business alone, but based on this traffic, various businesses can be additionally expanded," explaining the reasons for Coupang's high corporate value.

Furthermore, Coupang's major shareholder is SoftBank Vision Fund, led by 'investment genius' Son Jeong-hee, and Korea's high population density allows nationwide same-day delivery, which are attractive investment points for foreign investors.

Emart demonstrated online synergy with a positive same-store sales growth rate in the second half of last year, and its performance in core businesses is also improving. This is due to the active strategy of restructuring inefficient businesses and utilizing offline stores for online business.

In particular, Emart holds an unrivaled distribution competitiveness in the food sector. In 2020, domestic food and beverage consumption (including alcoholic beverages and tobacco) was approximately 126 trillion won, with Emart's market share estimated at 19%. Coupang is still considered inferior to Emart in the food category.

However, Emart lacks diversity in non-food categories and does not offer services such as free shipping and returns, which limits its ability to attract explosive traffic. Researcher Seo analyzed, "Emart seems to have 'many things to protect,' such as minimizing damage to offline business while growing online business and managing the profitability of online business."

Emart and Shinsegae have exchanged shares with Naver and declared collaboration to become e-commerce leaders. Following the alliance between Naver and CJ Logistics, there is anticipation that the triangular structure of Emart-Naver-CJ Logistics will create the largest domestic competitiveness in content, platform, and logistics. However, the concrete strategy and execution of how this alliance will be realized are considered the key to success. Researcher Seo said, "Currently, offline traditional leaders face a very important decision point regarding how much to invest, reduce, and how to persuade investors," adding, "Coupang's listing has given them greater stimulus and alertness than ever before."