[Platform Investment Sharp Decline]③ Coupang in a Quandary... Regulatory Pressure Domestically, Stock Price Plunge in the US

E-commerce Expands to Delivery Apps and OTT... Triggering Widespread Social Conflicts
Logistics Center Investments Cause Cumulative Losses... Shareholder Lawsuits Follow Stock Plunge

Editor's Note"We no longer invest in the platform industry." The Chief Investment Officer (CIO) of a major investment institution declared that the domestic platform industry is saturated and has no investment value. They explained that platform-leading companies have been established in each sector, making further expansion or new entry difficult, thus lowering their value as investment targets. Reflecting this atmosphere, the first-generation platform 11st, whose valuation has dropped, was forced onto the M&A market, and the stocks of Kakao Pay and Kakao Bank, once hailed as "national hopefuls," have fallen to a quarter or less of their previous value. Toss, aiming to become a 10 trillion won decacorn, is preparing for an IPO, but concerns arise that it will only serve as an "exit" channel for early investors. Even thriving platforms have clear limits. Coupang, which has emerged as a new distribution powerhouse with growing influence, faces all-around checks from regulators and competitors. The investment industry is reluctant to invest in platform companies, fearing a second dot-com bubble-like crisis. The end for platform companies as investment targets is near.

While the first-generation platform 11st is on the decline, Coupang has dominated the e-commerce market. Leveraging fast delivery, Coupang has surpassed even Naver Shopping to become the strongest predator in e-commerce. The problem is that, due to the nature of the platform economy where data accumulation easily leads to monopolies, Coupang's rapid growth is causing various social issues and triggering widespread conflicts. Rapid growth in a narrow domestic market has led to frequent disputes with vendors and consumers. The logistics center construction, which underpins this rapid growth, has resulted in large cumulative losses, preventing the company's valuation from rising and leading to lawsuits from shareholders, making the path thorny.

Coupang Emerges as a 'Strong Player' in Distribution... Despite Market Share Growth, Suffers from Widespread Conflicts

According to the Fair Trade Commission's 2022 "Domestic Online Shopping Market Status," Coupang holds a 24.5% market share, ranking first. Including the offline market, its share of the entire distribution market is only about 4%, but this is steadily increasing.

Professor Suhyeon Boo of Gyeongsang National University said, "People tend to see Coupang and Naver as similar, but they are like 'oil and water.' For example, when someone runs out of shampoo, those who want to buy shampoo go to Coupang, while those curious about which shampoo is good go to Naver. Coupang has properly built its logistics chain, so from the perspective of economies of scale, it quickly dominated the domestic market," he explained.

As concerns grow that Coupang will monopolize the domestic e-commerce market, it faces all-around checks. Although it has achieved the biggest success as a platform operator by gaining market share, surveillance and regulation over unfair trade practices abusing market dominance or superior bargaining position have intensified. As its market share increases, it is increasingly framed as squeezing vendors through commission hikes, narrowing its room to maneuver.

Safety issues involving Coupang's dawn delivery workers and logistics center employees have sparked repeated disputes with labor unions such as the Courier Union over overwork deaths. The commission rates charged to suppliers are also controversial. According to the 2022 distribution transaction survey released by the Fair Trade Commission last year, Coupang's effective commission rate among online shopping malls is the highest at 27.5%. Although this includes some special purchase commissions covering storage, delivery, and customer service, which differ from other distributors, it is more than double the industry average (12.3%).

Listed on the New York Stock Exchange... Facing Shareholder Lawsuits Due to Stock Price Collapse

Despite rising market share and being labeled a monopolistic business, Coupang's corporate value is not being equally recognized, which is the most painful point for the company. Coupang operates in Korea but is listed on the New York Stock Exchange. It has achieved rapid external growth and is about to announce its first profitable results. However, Coupang Inc.'s stock price on the NYSE has fallen to the $16 range, about one-third of its peak price of $69 after listing. It is less than half of the IPO price of $35. Consequently, shareholders who invested in Coupang Inc. in the U.S. have filed lawsuits against the company, holding it responsible for the stock price collapse. Coupang stated, "These lawsuits are baseless claims, and we will respond actively."

Coupang's accumulated losses exceed 6 trillion won. Although it achieved annual profitability last year, it is currently difficult to pay dividends to shareholders. Coupang's greatest strengths?fast delivery and logistics center construction?are hampering its performance. Since its founding in 2010, Coupang has invested over 6 trillion won in expanding logistics centers and plans to invest more. Since its establishment, it has built over 100 logistics centers nationwide, including 30 "camps," which are final delivery bases.

To expand profitability, Coupang is diversifying into businesses such as delivery applications and online video services (OTT), but these are seeds of further disputes. Critics argue that to sustain growth in a narrow domestic market, it may replicate the behaviors of existing "platforms." Coupang Eats, the leading delivery app, is embroiled in conflicts with vendors over commissions and delivery fees. As it is expected to expand into various business sectors such as media content, the scope of disputes and social pressure are likely to increase.

Professor Eunhee Lee of Inha University's Department of Consumer Studies said, "The platform economy is heavily regulated because it can easily become monopolized since switching platforms is just a click away. But conversely, it is a market where consumers can switch anytime, making it unstable and challenging, unlike traditional industries," she explained.