[Coupang vs CJ] "From Jobs to Putin, They Have Shares"... 'Hetbahn War' A to Z

"Coupang and CJ Power Struggle"
From the Beginning to Now, Exploring Future Prospects

The conflict between Coupang and CJ is escalating. The dispute over delivery prices between Coupang and CJ CheilJedang, which surfaced in November last year, remains unresolved, and Coupang has reported CJ Olive Young to the Fair Trade Commission for alleged violations of the Large-Scale Distribution Business Act. Industry analysts say that the conflict, which began as the 'Hetbahn War,' is expanding because it involves more than just Coupang and CJ. Factors such as rising raw material prices due to the Russia-Ukraine war, concerns over a global economic downturn, the rapid growth of mobile-based e-commerce driven by smartphone ubiquity, the power struggle between emerging dominant distributors (platforms) and established manufacturers to secure profitability, and the platform-versus-platform competition in an all-out, boundaryless competitive environment have all played a comprehensive role.

[Image source=Yonhap News]

CJ CheilJedang countered, saying, "Coupang demanded excessive profit margins, and when these demands were not met, they cut off orders."

The conflict is ongoing. In March, JP Morgan stated in a corporate analysis report that "CJ still finds profitability through Coupang higher compared to other e-commerce channels," explaining that "because Coupang, which has adopted a direct purchase system, incurs lower marketing and promotion costs than other open market platforms." This contradicts CJ CheilJedang's claim of 'excessive profit margins' at the time of Coupang's order suspension. CJ CheilJedang maintains that not all e-commerce platforms can be compared on the same level, while Coupang continues to argue that this is merely a 'platform taming' by the manufacturer.

Industry insiders interpret the ongoing conflict as a relentless power struggle over price-setting authority between Coupang, which ranks among the top in sales across both online and offline distribution channels, and CJ CheilJedang, the undisputed leader in the food industry. Since the social commerce era in the 2010s, Coupang has grown into a massive e-commerce company with quarterly sales reaching 7 trillion KRW, with its most powerful weapon being an aggressive lowest-price policy. With the widespread use of smartphones since 2009, the online shopping market expanded, and the COVID-19 pandemic accelerated the growth of non-face-to-face online shopping. Coupang capitalized on this momentum by offering low prices, fast delivery, and easy exchanges and returns, securing a large loyal customer base. As a result, Coupang recorded sales of 7.399 trillion KRW in the first quarter, a 20% increase compared to the same period last year.

CJ CheilJedang, the undisputed number one food company, also faced rising raw material prices and logistics and operating costs due to COVID-19 and the Russia-Ukraine war. Against this backdrop, the company engaged in an uncompromising battle for delivery price leadership against a platform whose product sales share has grown rapidly over several years to a level that cannot be ignored even when considering the entire distribution sector beyond e-commerce. The power struggle between the dominant platform and the dominant manufacturer ultimately failed to reconcile, resulting in CJ CheilJedang products disappearing from Coupang.

Expansion of the 'Anti-Coupang' Camp vs. Coupang Emphasizing Strength Without CJ CheilJedang

Although both companies officially stated that they were continuing efforts for a 'smooth agreement' after the order suspension, a 'Plan B' was underway behind the scenes. After Coupang suspended orders, CJ CheilJedang strengthened the 'anti-Coupang alliance,' responding by aggressively marketing on platforms other than Coupang. Since the end of last year, CJ CheilJedang's popular products have been featured as 'Shooting Delivery' flagship items on 11st, and as 'special exhibition' products on Gmarket and Auction. In March, they also signed a partnership to jointly develop products with Kurly. Other distributors saw the Coupang-CJ conflict as an opportunity to showcase the leading food company's flagship products under favorable conditions while keeping a check on their competitor, Coupang.

The conflict intensified in June. When Shinsegae Group announced that CJ CheilJedang would participate in an event ahead of the launch of its paid membership 'Shinsegae Universe Club,' stating that "the two companies with the highest competitiveness in food and distribution sectors are partnering to plan joint products and will even pre-launch them," Coupang responded within four days by targeting CJ CheilJedang, claiming that "products from the monopolistic food company have disappeared from Coupang, leading to a surge in sales of small and medium-sized enterprises' products." Coupang also announced that its food category grew more than three times (20%) compared to the domestic food market in the first quarter of this year, emphasizing that it remains strong even without CJ CheilJedang.

As the conflict that surfaced has entered an intensifying phase, the industry expects that it will take time before reconciliation is possible. Recently, Coupang has broadened its target to include CJ Olive Young, filing a complaint with the Fair Trade Commission for alleged violations of the Large-Scale Distribution Business Act.

CJ CheilJedang Center [Photo by CJ CheilJedang].

Amid Rapid Changes in Distribution Environment, Distributors vs. Manufacturers... A Second Coupang vs. CJ CheilJedang Could Emerge

Industry experts agree that "both parties have much to lose but cannot back down." In a distribution market worth 700 trillion KRW, where clear distinctions between business types no longer exist and all-out competition is necessary, Coupang, which has become a giant e-commerce company but needs to find additional growth momentum, and the large food company focused on securing profitability amid challenging market conditions, both have no room to retreat, according to experts.

Given the deepening concerns over an economic downturn, the uncompromising battle between distributors and manufacturers could lead to the emergence of a second Coupang or a second CJ CheilJedang. Some major global luxury and fashion companies have already severed ties with globally influential platform companies like Amazon and are strengthening their independent sales channels.

Professor Eunhee Lee of Inha University's Department of Consumer Studies explained, "In the current global market environment, conflicts between distributors and manufacturers are inevitable," adding, "Major platform companies that have consumer purchase data and are the final point of contact with consumers wield strong power, but in a structure where powerful distributors compete without boundaries, competition with other distributors cannot be ignored, creating a complex situation." She continued, "From the consumer's perspective, it is important to receive products at lower prices through healthy competition, so consumers will decide whether to settle on other products on frequently used platforms or follow the manufacturer's products. The power struggle between distributors and manufacturers will be fiercely fought while monitoring consumer behavior."

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