“We will invest 22 trillion won ($16 billion) in direct purchases of made-in-Korea products,” said Coupang founder and CEO Kim Beomseok, also known as Bom Kim, during the company’s first-quarter earnings conference call on May 8. The ambitious investment strategy comes in response to heightened competition from Chinese e-commerce companies. He noted that in South Korea, barriers to entry are low for Chinese e-commerce companies and announced plans to boost investment in products and customer services this year.
The Korean e-commerce giant faces increasing competition from AliExpress and Temu, Chinese e-commerce sites armed with ultra-cheap products and free shipping. As a result, Coupang’s first-quarter operating profit dropped by more than half year-on-year in the first quarter and incurred a net loss.
Coupang reported that while first-quarter revenue increased 28% year-on-year to 9.45 trillion won ($7.14 billion), operating profit fell 61% to 53.1 billion won during the same period. This is the first time quarterly operating profit decreased year-on-year since the third quarter of 2022, when Coupang posted its first operating profit. The company’s net loss amounted to 31.8 billion, down from a net profit of 116 billion won a year ago, marking the first net loss since the second quarter of 2022.
Kim pointed out that barriers to entry are low in the Korean retail market. “We are still growing in Korea, but our market share in the massive and fragmented $560 billion e-commerce market remains in the single digits,” he said.
“The entry of Chinese e-commerce players serves as a reminder that the barriers to entry in the retail market are low, and consumers can switch to other shopping options in seconds with a single click.”
Coupang plans to respond to the aggressive expansion of Chinese e-commerce with more investment. Kim outlined several strategies, including a multi-billion-dollar logistics investment to expand free shipping, increase the purchase and sale of products manufactured in Korea, and enhance the benefits of the WOW membership.
“Our goal is to continue investing billions of dollars in capital over the next few years to strengthen our fulfillment and logistics infrastructure, increase delivery speeds, and offer free shipping to remote areas such as mountainous islands,” Kim said. Coupang previously announced that it would invest over 3 trillion over three years through 2026 to open eight new logistics centers in Gimcheon and Gwangju and launch rocket delivery to 50 million people nationwide by 2027.
The company also said it would support local manufacturers by increasing purchases and sales of products manufactured in Korea from 17 trillion won last year to 22 trillion won this year. Additionally, the company plans to boost investment in WOW membership benefits, including free shipping, returns, and exclusive discounts, from 4 trillion won last year to 5.5 trillion won this year.
“Coupang’s WOW membership includes free access to sports events such as the MLB season opener in March and live broadcasting of European soccer matches every summer,” said Kim. “Coupang Eats recently launched unlimited free delivery for WOW members nationwide, eliminating recurring consumer costs.”