Coupang's 1Q Operating Profit Halved... Kim Beom-seok: "5.5 Trillion Won Investment in Wow Membership" (Comprehensive Report 2)

Net Income Turns Negative for Only 7 Quarters
Sales Surpass 9 Trillion Won for the First Time Ever
Active Customers Increase 16% to 21.5 Million

Kim Beom-seok, Chairman and Founder of Coupang Inc., stated on the 8th, "We will increase the purchase and sales volume of domestically produced manufacturer products, including small and medium-sized enterprises, to 22 trillion won this year, and invest 5.5 trillion won in Wow Membership benefits."

Chairman Kim said at Coupang's Q1 earnings 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," expressing this intention.

This statement reflects the intention to further expand investment in response to the recent intensified offensive by Chinese direct purchase apps such as AliExpress and Temu in the domestic e-commerce market. Coupang's direct purchase volume last year was 17 trillion won, and the plan is to increase it by about 5 trillion won this year. Investment in Wow Membership benefits, a paid membership system, will also be expanded by 1 trillion won compared to last year.

Coupang's Q1 earnings announced that sales exceeded 9 trillion won for the first time, but operating profit was halved, resulting in a net loss. Although the operating profit remained positive, it appears to have taken a difficult first step toward achieving two consecutive years of profitability.

Beom-seok Kim, Chairman and Founder of Coupang Inc.

Operating Profit Down 61%... Sales Surpass 9 Trillion for the First Time

Coupang, listed on the New York Stock Exchange, announced on the 8th that its Q1 operating profit was $40 million (approximately 53.1 billion won, based on an exchange rate of 1,328.45 won), down 61% from the same period last year. This is the first time since Q3 2022, when Coupang first turned an operating profit, that operating profit has decreased year-over-year.

Net loss was $24 million (approximately 31.9 billion won), marking a return to deficit after seven quarters since Q2 2022. Previously, Coupang had posted six consecutive quarters of net profit from Q3 2022 through Q4 last year. In Q1 last year, net profit was $90.85 million (approximately 116 billion won).

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-over-year to 9.068 trillion won. This is the first time Coupang's quarterly sales have exceeded 9 trillion won.

Chairman Kim said, "We are still growing in Korea, but our market share in the huge and segmented commerce market worth $560 billion (approximately 761 trillion won) remains in the single digits," adding, "We must capture customers' hearts by offering the best product range, prices, and services."

22 Trillion Investment in Direct Purchase of 'MADE IN KOREA' Products

Chairman Kim's remarks indicate that, as the recent results show there is no consumer 'lock-in' in the distribution market where competition has intensified due to the entry of Chinese e-commerce platforms such as AliExpress and Temu, Coupang intends to increase investment to capture consumer loyalty.

He mentioned specific measures including ▲ expanding free shipping through logistics investments worth billions of dollars ▲ increasing purchase and sales of products made by Korean manufacturers ▲ expanding investment in Wow Membership benefits. He said, "Our goal is to continuously invest billions of dollars over the next few years to strengthen fulfillment and logistics infrastructure, increase delivery speed, and enable free delivery even to remote areas such as islands and mountainous regions."

Previously, Coupang announced plans to invest more than 3 trillion won over three years until 2026 to operate eight new logistics centers in locations such as Gimcheon, Gyeongbuk, and Gwangju, and to promote Rocket Delivery nationwide by 2027.

Chairman Kim said, "Logistics investment will support service improvements for Rocket Delivery products from Korean manufacturers and small businesses," and added, "To significantly strengthen support for Korean manufacturing, we will increase the purchase and sales volume of domestically produced manufacturer products, including small and medium-sized enterprises, to $16 billion (22 trillion won) this year." He also announced plans to invest about $4 billion (5.5 trillion won) in Wow Membership benefits, up from $3 billion (4 trillion won) last year.

Coupang Headquarters, Songpa-gu, Seoul. Photo by Jinhyung Kang aymsdream@

Product Commerce Active Customers Increase by 2.9 Million in One Year

By business segment, product commerce sales (Rocket Delivery, Rocket Fresh, Marketplace, Rocket Growth) reached $6.494 billion (8.6269 trillion won), a 20% increase year-over-year.

Chairman Kim said regarding the Rocket Fresh business, "Sales volume increased by 70% compared to the same period last year." Regarding Rocket Growth, he said, "Along with the convenience of dawn, same-day, or next-day delivery, the range of products customers use is expanding day by day," adding, "Rocket Growth sales volume this quarter grew 130% year-over-year."

The number of active customers in product commerce was 21.5 million, a 16% increase from 18.6 million the previous year. Sales per active customer were $3.15 million (418,460 won). Active customers refer to the number of customers who have purchased products at least once on Coupang.

Gaurav Anand, Coupang CFO, said, "The increase of 2.9 million active customers over one year shows that Coupang is continuously investing to provide a wide variety of products at the fastest, most stable, and lowest prices." Chairman Kim also said, "The increase in new active customers is expected to contribute to future business growth."

Acceleration of Growth Businesses Including Coupang Eats and Farfetch

Sales from growth businesses such as Coupang Eats, Taiwan operations, and Farfetch reached $620 million (823.6 billion won), more than four times the $142 million (181.3 billion won) recorded in the same period last year. This was driven by the inclusion of Farfetch.

However, losses increased. The EBITDA loss of growth businesses was $186 million (247 billion won), four times larger than the same period last year. This includes Farfetch's EBITDA loss of 41.1 billion won ($31 million).

Chairman Kim said, "Farfetch's journey is just beginning," and added, "We are focusing on approaching annual adjusted EBITDA profitability by the end of the year." He also said, "Since launching free delivery for Coupang Eats in March, the number of customers and orders increased at the largest rate ever compared to the previous year," and "In Taiwan, we are supporting more than 21,000 Korean suppliers to export products to the Taiwanese market as of last year."

Chairman Kim stated, "2024 will be an important year to enhance customer experience and expand essential support for manufacturing and small business partners," and added, "We will continuously strive to provide customers with new 'Wow' moments across products, prices, and services."

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