Sales Surpass 9 Trillion Won for the First Time Ever
Operating Profit Drops 61% in Q1 This Year
Domestic Direct Purchase Expanded to 22 Trillion Won
'Made in Korea' Strategy Draws Attention
Wow Membership Benefits Likely to Expand
Coupang's operating profit in the first quarter of this year plummeted by more than half. Although sales surpassed 9 trillion won for the first time in a quarter, continuing its growth trend, profitability shrank significantly as the company engaged in a price war to counter the onslaught of Chinese direct purchase applications (apps) such as AliExpress and Temu, which promote ultra-low-priced Chinese products. Kim Beom-seok, chairman of Coupang Inc. and the company's founder, declared a ‘Made in Korea’ strategy to expand the direct purchase scale of domestic products to 22 trillion won and to increase Wow Membership benefits to retain consumers.
Operating Profit Down 61%... Sales Surpass 9 Trillion Won for the First Time
Coupang, listed on the New York Stock Exchange, announced on the 8th that its operating profit for the first quarter of this year was $40 million (approximately 53.1 billion won, based on an exchange rate of 1,328.45 won), down 61% compared to the same period last year. This marks the first time since the third quarter of 2022, when Coupang first turned an operating profit in a quarter, that operating profit has decreased year-on-year. Sales increased by 28% to $7.114 billion (9.4505 trillion won). Even excluding the first-quarter sales of Farfetch, acquired in January and reflected for the first time this quarter ($288 million, 382.4 billion won), sales grew 23% year-on-year to 9.068 trillion won. This is the first time Coupang's quarterly sales have exceeded 9 trillion won.
However, with operating profit sharply reduced, the company recorded a net loss of $24 million (approximately 31.9 billion won). This marks a return to deficit after seven quarters since the second quarter of 2022. Previously, Coupang had achieved net profits for six consecutive quarters from the third quarter of 2022 through the fourth quarter of last year. In the first quarter of last year, it posted a net profit of $90.85 million (approximately 116 billion won).
Kim Beom-seok: "Low Entry Barriers for Chinese E-commerce... Must Capture Customers with the Best Product Lineup"
Chairman Kim said during the conference call, "The low entry barriers for Chinese e-commerce companies show that consumers do not hesitate to choose other shopping options with just one click." The intensified competition due to the entry of Chinese e-commerce platforms such as Ali and Temu into the domestic market means there is no ‘lock-in’ keeping consumers tied to Coupang, as reflected in these results.
In response, Kim pledged to increase investments to capture consumers' hearts. He stated, "To significantly strengthen support for Korean manufacturing, we will increase the purchase and sales scale of domestic manufacturers' products, including small and medium-sized enterprises, from 17 trillion won last year to 22 trillion won this year," and "We will expand investment in Wow Membership from $3 billion (4 trillion won) last year to about $4 billion (5.5 trillion won)." Kim mentioned plans to expand free shipping through logistics investments, invest in Wow Membership benefits, and increase purchases and sales of products made by Korean manufacturers.
Since Chinese e-commerce platforms are encroaching on the domestic market with ultra-low-priced Chinese products, Coupang plans to compete on quality with domestic products. This is the so-called ‘Made in Korea’ strategy.
Over 21,000 Korean Companies Export to Taiwan... ‘Made in Korea’ Strategic Move
In the first quarter, Coupang's growth businesses, including Coupang Eats, the Taiwan business, and Farfetch, recorded sales of $620 million (823.6 billion won), more than quadrupling compared to $142 million (181.3 billion won) in the same period last year. Chairman Kim introduced that as of last year, more than 21,000 Korean suppliers showcased their products in the Taiwanese market through Coupang.
As a result of supplying high-quality domestic products at affordable prices with excellent service, Coupang succeeded in attracting consumers. In fact, the Rocket Fresh business, a fresh food same-day delivery service, saw a 70% increase in sales volume compared to the same period last year. Kim evaluated, "Along with the convenience of dawn, same-day, or next-day delivery, the range of product categories customers use is expanding day by day."
In the first quarter, the number of active product commerce customers on Coupang was 21.5 million, a 16% increase from 18.6 million the previous year. Active customers refer to the number of customers who have purchased products on Coupang at least once. Kim said, "2024 will be an important year to enhance customer experience and expand essential support for manufacturing and small and medium-sized enterprise partners," adding, "We will continuously strive to provide customers with new ‘Wow’ moments across products, prices, and services."
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