S Korean unicorn Coupang stretched by order surge as coronavirus cases rise

Photo by RoseBox on Unsplash

As South Korea’s coronavirus cases leapt above 5,000 this week, mask-wearing workers at a logistics centre run by e-commerce firm Coupang Corp raced to disinfect trucks and load thousands of boxes of microwavable rice, disposable diapers and kitchen towels.

“In the past, we used to go out with the truck half full, but these days, there’s so much to deliver there are leftover packages after filling the truck completely,” 27-year-old Jung Im-hong, a contract delivery driver, told Reuters.

Even before the epidemic, South Korea was expected to become the world’s No. 3 e-commerce market this year after China and the United States, according to Euromonitor, a remarkable statistic for a nation of just 51.7 million.

Now as the country emerges as critical hotspot in the global epidemic with the most cases outside China, its shift to online shopping is only gathering speed.

Coupang, which has secured $3 billion in investment from SoftBank and its Vision Fund, has seen deliveries climb to 3 million daily since mid-February from around 2.2 million per day late last year.

But the surge in orders, mostly for low-margin goods such as household items and fresh produce, may be a double-edged sword as delivery costs also balloon, potentially setting the 10-year old firm even further back in its quest for profitability, analysts said.

“It’s difficult, there’s so much to deliver,” said Yoo Min-hyuck, who oversees one of Coupang‘s logistics centres in Incheon.

For each shift, the centre can now call on about 100 part-time workers, who use their own cars to handle overflow, whereas previously about half that number would line up for work.

Growth In Sales And Losses

Founded by 41-year-old Harvard graduate Bom Kim, Coupang made a splash with its ‘Rocket Delivery’ service that promised delivery within 24 hours and dealt a sharp blow to the country’s family-owned retail conglomerates including Shinsegae and Lotte. Lotte Shopping Co Ltd announced last month it will close about 200 of its 700 offline stores in the next 3-5 years.

At the time of the Vision Fund’s $2 billion investment in late 2018, Coupang was valued at around $9 billion.

But Coupang‘s history suggests that the more it sells, the more losses it makes. Although revenue soared 65% to 4.4 trillion won in 2018, operating losses expanded 72% to 1.1 trillion won, according to its latest public filing.

And established players are not going quietly: Shinsegae, which owns country’s largest big-box store chain E-Mart Inc, last year set up a dedicated e-commerce unit and a logistics centre with a built-in bakery.

It must also compete with eBay Inc’s South Korean unit and online search portal Naver Corp which has partnered with a multitude of independent online shopping malls to become the national leader in e-commerce market share, according to Seoul-based SK Securities.

The competition with cash-rich players could be an uphill battle for Coupang, said Han Tae-il, analyst at Korea Investors Service, a unit of credit rating agency Moody’s.

“For Coupang to keep holding on, it may need more funding before long,” he said.

The company declined to comment on when it may reach breakeven point or whether it will soon need more financing. When asked about possible IPO plans, a spokeswoman said Coupang does not have a concrete plan to conduct an offering at this moment.

What’s clear, however, is that the coronavirus outbreak is having an unprecedented impact on the e-commerce market in Asia as millions are either being forced to work from home or are choosing to.

“And this is placing a tremendous strain on e-commerce markets as well as suppliers of daily goods,” said Jared Conway, head of research at Euromonitor International, adding that the epidemic could permanently change how consumers think about what they order online.

Demand has skyrocketed so much, especially in Daegu, the South Korean city with the most coronavirus cases, that deliverymen often receive thank-you notes and sometimes gifts from customers.

Coupang deliveryman Jung, wiping the sweat off his brow as he loaded bottled water into the truck, said he’s just focussed on getting necessities to people isolated at home – despite the worries of his wife, with whom he’s had a new baby.

“Customers use us a lot because they can’t leave the house,” he said. “I think it would have been harder for people without same-day delivery service.”

Reuters

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.