Coupang's Profit Improvement Exceeds Expectations... Potential for Online Distribution Restructuring Increases

Last Year Revenue of 7.1531 Trillion KRW, Operating Loss of 720.5 Billion KRW Recorded... Deficit Reduced by About 400 Billion KRW

[Asia Economy Reporter Kum Boryeong] Coupang has achieved profitability improvements that exceeded market expectations, raising the possibility of a restructuring in the online distribution market.

According to Hanwha Investment & Securities on the 18th, Coupang's performance last year recorded sales of 7.1531 trillion KRW and an operating loss of 720.5 billion KRW. Compared to 2018, sales increased by 64.3%, and the operating loss decreased by about 400 billion KRW.

The market had expected Coupang's operating loss to widen. It was judged that the burden related to the expansion of large-scale free delivery services would increase, and due to the decline in operating performance of competitors, concerns about promotional event costs were anticipated.

Contrary to market expectations, Coupang showed a reduction in the deficit. Nam Seonghyun, a researcher at Hanwha Investment & Securities, said, "Attention should be paid to the fact that the performance of Coupang's major subsidiaries is rapidly improving. Coupang's main subsidiaries are divided into 'Coupang Fulfillment Service', 'Tteonayo', and 'Coupang Logistics'. Last year, the performance of these three subsidiaries all showed improvement, and in particular, Coupang Fulfillment Service recorded sales of 584.5 billion KRW (a 35.1% increase year-on-year) and net profit of 24.9 billion KRW (a 304.8% increase year-on-year)." He added, "The improvement in Coupang Fulfillment Service's performance can be seen as the effect of logistics infrastructure construction becoming full-fledged, establishing differentiated competitiveness compared to competitors. Unlike competitors, it is judged to have a business model that can expect profits in the online market, so there is no longer a need to apply the formula that expansion of scale inevitably leads to a wider deficit."

Royalties for power sellers increased. One of the biggest weaknesses of online companies was that the larger the scale, the greater the deficit, but Coupang last year achieved simultaneous improvement in both operating scale and profitability. This is interpreted as a result of consolidating power sellers through the construction of fulfillment service infrastructure.

The possibility of restructuring the domestic online distribution market has increased due to Coupang. Park Jongdae, a researcher at Hana Financial Investment, said, "In the structurally difficult-to-profit online distribution market, if Coupang continues to improve profitability while expanding market share, major online distribution companies including 11st and Gmarket have two choices: either continue investing and competing like Coupang or pursue mergers and acquisitions (M&A). When Coupang expanded its operating loss, it could have been difficult to attract new investments, and a market structure with eased competition due to Coupang's elimination could have been expected, but now that is also difficult," he analyzed.

This content was produced with the assistance of AI translation services.