[Coupang vs CJ] "The Heated Battle Over Hetbahn Spreads to Olive Young"... Pros and Cons for Each Company

Coupang Accelerates Beauty Business, Challenges Traditional Leaders
Targets CJ, Including CJ CheilJedang with Previous Conflicts

Olive Young Faces Fair Trade Commission Review Over 'Gapjil' Complaints
Dominant Position in H&B Market May Actually Be Advantageous

The background behind Coupang reporting CJ Olive Young to the Fair Trade Commission for alleged violations of the Large-scale Distribution Business Act is also complex. Behind the claim that CJ Olive Young blocked deliveries and transactions to Coupang by small and medium-sized suppliers lies an analysis that Coupang, having fully entered the beauty market, intends to check CJ Olive Young, a traditional powerhouse in this market. Additionally, amid the intensifying 'Hetbahn War' with CJ CheilJedang, there is an interpretation that this move targets the entire CJ group. While it is a negative factor that CJ Olive Young will now face the Fair Trade Commission's judgment regarding this 'gapjil' (abuse of power) report, industry analysts believe that it has actually gained an advantageous position in the ongoing Fair Trade Commission investigation into whether CJ Olive Young is a dominant player in the health & beauty (H&B) sector.

Coupang Checks Beauty Powerhouse + Targets Entire CJ Group

This month, Coupang officially launched the luxury beauty brand exclusive section 'Rocket Luxury,' marking a full-scale expansion of its direct beauty purchasing business. It emphasized the advantage of being able to conveniently purchase luxury beauty products directly procured from brand headquarters through Wow Membership free shipping and free return services.

Since the end of 2021, Coupang has put effort into the beauty market by creating Beauty Data Lab, announcing beauty trend keywords reflecting customer demands, and conducting customer participation campaigns incorporating customer voices. It has also continued to launch specialized sections such as collaborations with small and medium-sized enterprises for beauty product development and the Derma Cosmetic section. Coupang's moves reflect the judgment that it has reached a point where it should shift its strategy from expanding the number of customers, which has limitations in market size, to increasing the average spending per customer. As of the first quarter, the number of active customers who purchased products at least once on Coupang exceeded 19 million.

Coupang judged that beauty is the representative category symbolically appealing that customers can purchase not only 'cheap products' but also 'high-quality' products at competitive prices compared to other platforms. The fact that beauty products are easier to manage in inventory compared to large items like fresh food and electronics is also why beauty was chosen as a key category for the 'next step.'

Coupang's claim is that "CJ Olive Young has continuously engaged in 'gapjil' by blocking deliveries and transactions to Coupang from small and medium-sized suppliers since 2019 until recently." It viewed CJ Olive Young as having a superior bargaining position over suppliers, considering that its annual sales exceed 2 trillion won and that 80% of the products it handles are sourced from domestic small and medium-sized suppliers. The industry sees Coupang's report to the Fair Trade Commission as a card to check the traditional powerhouse while also having a plan to diversify its transaction relationships as a latecomer.

There is also an interpretation that the conflict with CJ CheilJedang, which recently escalated into an all-out war over supply price disputes, has expanded to the CJ Group level. CJ Olive Young is also a key affiliate attracting attention in the succession process to pass the group to Lee Seon-ho, the eldest son of CJ Group Chairman Lee Jae-hyun.

Olive Young Faces Fair Trade Commission Judgment on 'Gapjil' and Market Dominance

CJ Olive Young drew a line by stating, "We have never restricted partner companies from entering any distribution channels, including Coupang." However, since the report has been filed, an investigation and judgment by the Fair Trade Commission are expected.

The industry believes that Coupang's report to the Fair Trade Commission has introduced a variable into the existing Fair Trade Commission investigation of CJ Olive Young. CJ Olive Young is under investigation for allegedly forcing suppliers to engage in exclusive transactions by not supplying products to offline health & beauty competitors such as Lalavla and LOHB's. The Fair Trade Commission is reviewing the application of abuse of market dominance provisions under the Fair Trade Act and is preparing for a plenary session.

The key issue is whether CJ Olive Young can be considered a 'market-dominant business operator' in the health & beauty sector. The size of the fine depends on this judgment. Even if the same gapjil behavior occurred, a market-dominant operator faces heavier sanctions considering the impact on the entire market. The premise of market dominance is 'market definition' (clearly segmenting the market). CJ Olive Young argues that its market dominance is minimal because it competes not only with health & beauty but also with offline retailers such as department stores and e-commerce companies like Coupang and Naver.

From this perspective, Coupang's report ironically supports CJ Olive Young's claim that it competes across both online and offline distribution channels. CJ Olive Young's offline health & beauty market share rose to 71.3% in the first quarter of this year after Lalavla and LOHB's exited the market. However, when expanding the scope to all online and offline beauty competitors, CJ Olive Young's market share drops to about 12% of the domestic cosmetics market size (22.5 trillion won) based on 2022 Statistics Korea data.

Professor Seo Yong-gu of Sookmyung Women's University’s Department of Business Administration said, "From Coupang's perspective, which is at a turning point where it needs to increase the average spending per customer, the category that can deliver results in the shortest time is beauty." He added, "This is a conflict phase between offline beauty powerhouse distributors and online distributors seeking to expand their presence in the beauty market based on existing influence, reflecting intensified competition among distributors."

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