[Why&Next] Chaser and Chased... Coupang vs Ali's 'Money Game' Strategy?

Ali "Zero Seller Fees in Korea Until June"
Following Large-Scale Logistics Investment, Supporting Korean Companies' Exports
Targeting the Largest Population 'Sudogwon'... Shaking Up Coupang

Coupang and the Chinese direct purchase app AliExpress are intensifying their competition in the domestic market. Ali, which is encroaching on the domestic e-commerce market by promoting 'ultra-low-priced' products, has invested 1.5 trillion won to strengthen its fastest delivery service, considered its biggest weakness. In response, Coupang has unveiled the 'Nationwide Kusegwon' card, investing more than twice that amount?over 3 trillion won?to enable free same-day delivery nationwide. In turn, Ali has extended its 'zero commission' policy for domestic sellers on its platform and is fueling a 'anti-Coupang alliance' to launch a counterattack.

Zero Commission and Overseas Export Support... Ali as the Focal Point of the 'Anti-Coupang Alliance'

According to the distribution industry on the 31st, Ali will continue its zero commission policy for domestic sellers until June. Ali, which operates an open market, counts seller commissions as one of its main revenue sources. Since launching the Korean product sales channel 'K-Veune' last October, Ali has implemented a 'zero commission' policy for domestic sellers, sacrificing core profits to send a 'love call' to domestic sellers.

Additionally, Alibaba Group, which operates Ali, announced that it will carry out the 'Korean Industry Leader Project' through its B2B platform Alibaba.com to support Korean companies' overseas exports. This project aims to help selected domestic companies, chosen through a screening process, enter the global market.

Previously, Alibaba included in its business plan submitted to the Korean government a commitment to invest $100 million (approximately 131.6 billion won) to assist domestic sellers in global sales. The plan also includes establishing a sourcing center to discover excellent Korean products and opening a global sales channel serving as an export platform by June. The goal is to support the global exports of up to 50,000 Korean SMEs over three years.

Ali's policy came shortly after Coupang announced its large-scale new investment plan. On the 27th, Coupang revealed plans to invest more than 3 trillion won over three years from this year through 2026 in expanding logistics and delivery networks and adopting advanced automation technologies. Through this, Coupang aims to achieve '100% free Rocket Delivery nationwide.'

Coupang currently operates Rocket Delivery in 182 out of 260 basic local governments nationwide, accounting for 70%, and plans to increase this to about 230 locations by 2027. As of the end of last month, this means providing Rocket Delivery to 50 million people, close to South Korea's population of 51.3 million.

Industry insiders interpret Coupang's investment plan as a measure to check Ali. Rocket Delivery, which made Coupang the number one player in the domestic e-commerce industry, operates in a 'direct purchase' model by building its own logistics centers nationwide and directly sourcing products from manufacturers. With a high market share and logistics advantages such as same-day and dawn delivery, Coupang holds a superior position in supply negotiations with product manufacturers. For example, CJ CheilJedang stopped supplying products after a price dispute with Coupang, and LG Household & Health Care also ceased transactions for similar reasons but resumed supply earlier this year.

Ali recently entered the domestic fresh food delivery market, and once its logistics center investment in the metropolitan area is completed, delivery times are expected to be significantly shortened. If Ali, which has a price advantage, starts fast delivery of fresh food in the densely populated metropolitan area, it could quickly increase its market share. This could lead domestic sellers to join Ali's platform and weaken Coupang's negotiation power with suppliers. This is seen as the background for Ali's trillion-won scale investment.

Coupang's counterattack card targets "shopping-deprived non-metropolitan areas" and expands the battlefield

In response, Coupang is expanding the battlefield nationwide. While Ali targets the metropolitan population to shake Coupang, Coupang is interpreted as aiming to secure additional growth engines by completing a nationwide Rocket Delivery map. According to app and retail analysis services WiseApp, Retail, and Goods, the number of Coupang app users exceeded 30 million last month. This means half of the entire population already uses Coupang.

Coupang achieved an operating profit of over 600 billion won last year, marking its first annual profit in 14 years since its founding in 2010. The photo shows Coupang headquarters in Songpa-gu, Seoul, on the 28th. Photo by Jinhyung Kang aymsdream@

As of the end of last year, the registered population in the metropolitan area was about 26 million, and the non-metropolitan population was about 25 million. If Coupang expands Rocket Delivery in non-metropolitan areas, it is expected to significantly increase app users, whose recent growth has slowed.

Coupang plans to start construction and invest in facilities for new fulfillment centers (FCs) in more than eight locations by 2026, including Gimcheon in Gyeongsangbuk-do, Jecheon in Chungcheongbuk-do, Busan, Icheon in Gyeonggi-do, Cheonan in Chungcheongnam-do, Daejeon, Gwangju, and Ulsan. Logistics facility investments in Gwangju and Daejeon will be completed this year, and operations will begin. The Busan and Icheon FCs are scheduled to start construction in the second quarter of this year. Gimcheon FC will begin construction in the third quarter, and Jecheon FC in Chungbuk in the fourth quarter.

Coupang plans to continue sequentially expanding new FC investments. However, the size and area of the eight new FCs have not yet been disclosed.

Ali Shakes Coupang... Coupang Expands Nationwide Front, Who Will Win?

Therefore, there is an interpretation that Ali will find it difficult to catch up with Coupang in the short term. Coupang's new logistics investment scale (over 3 trillion won) is twice the total investment scale of Ali (1.4471 trillion won). Of this, Ali uses about 260 billion won for building logistics centers, making the logistics investment gap nearly tenfold. Coupang has invested 6.2 trillion won over the past decade in building domestic logistics infrastructure. Since Coupang plans to pour more than 3 trillion won, half of that amount, into investments over the next three years, the delivery gap between the two sides is expected to widen further.

However, since Ali has offset its relatively slow delivery disadvantage with 'ultra-low prices,' the establishment of logistics centers is analyzed to potentially shake the domestic e-commerce market. This is because delivery times can be reduced to the level of other domestic e-commerce companies through logistics centers. Ali has previously placed some products in logistics centers near Chinese ports and shipped them to Korea by sea. The delivery time was about seven days, which is fast for sea transport but relatively slow compared to domestic e-commerce using parcel delivery.

Ali is expected to introduce a method of stocking low-priced Chinese products in domestic logistics centers and shipping products domestically immediately upon order. In this case, delivery time will be reduced to about two days, the typical parcel delivery period.

Some speculate that Ali will build a cold chain for fresh food delivery and expand its online grocery business in earnest. Since fresh food cannot be stored for long periods and shows repeat purchase patterns, and due to the 'lock-in effect,' securing a certain scale of fresh food customers makes it easier to expand sales to other highly profitable products. In this case, delivery time will be reduced to about two days, the typical parcel delivery period.

Benefits for domestic sellers are expected to continue for the time being. After launching K-Veune and implementing the zero commission policy, the number of domestic sellers on Ali has rapidly increased. Currently, K-Veune includes official online partners of Samsung Electronics, as well as LG Household & Health Care, Amorepacific, Aekyung, Nongshim, Lotte Chilsung Beverage, and Korea P&G.

There is also a forecast that Ali will become the focal point of the 'anti-Coupang alliance' by aggressively expanding its size through investment. By offering low commissions to sellers and ultra-low prices and free returns to customers, Ali can increase both sellers and customers, thereby eroding Coupang's market share. For example, CJ CheilJedang, which had a price dispute with Coupang, joined Ali's K-Veune and started special sales. The number of domestic customers using Ali continues to grow. Ali's app monthly active users (MAU) are reportedly the second highest among domestic e-commerce apps.