Korean eCommerce giant Coupang announced fourth-quarter earnings on Tuesday (Feb. 27), reporting a year of accelerated growth, record profits and a strong cash balance of over $5.5 billion dollars.
“We believe that creating moments of ‘Wow’ for customers across selection, price and service form the foundation for long term growth, profitability and ultimately free cash flow, which serves as the basis of long-term shareholder value,” Bom Kim, founder and CEO, told investors and analysts on a call.
In 2023, Coupang’s active customers grew steadily each quarter, starting the year with a 5% increase compared to the previous year, and culminating with a peak of 16% year-over-year (YoY) growth in Q4. This resulted in a record 21 million active customers — the highest growth rate in two years. Overall, total net revenues reached $6.6 billion, marking a significant 23% increase YoY.
The company’s paid monthly subscription program, Wow, now boasts 14 million subscribers, up 27,000 since last year. This growth was fueled by the introduction of the Eats WOW membership savings program in early Q2.
Kim further elaborated on the “positive externalities” observed in customer engagement across their products and offerings, highlighting how purchasing in one category, such as Eats, has led to higher engagement in other categories like product commerce.
In terms of other categories, Coupang Play, the firm’s subscription-based video streaming service launched in December 2020, emerged as the most downloaded app in Korea in all categories on both iOS and Android in 2022 and 2023, according to company executives, offering users exclusive access to some of the most-streamed live sporting events in the East Asian country.
“For the first time ever, millions were able to see Neymar, Haaland and Son [Heung-Min] play in Korea with international franchises like Manchester City, PSG and Tottenham Hotspur,” Kim pointed out, adding that Play members will have exclusive access to tickets and live broadcasts for the two Dodgers vs. Padres games taking place in Korea this spring.
Another highlight of the year was the $500 million acquisition of struggling luxury retailer Farfetch last December, a strategic move that has expanded Coupang’s presence in the personal luxury goods segment in South Korea, a market known for its highest per-capita spending on such goods worldwide.
“Luxury is a very large market segment, and it’s one that hasn’t been captured in any meaningful way by eCommerce players yet,” Kim noted, adding, “We hope in a few years, we’ll be having a conversation about how Coupang turned Farfetch into a business that transformed the customer experience around luxury fashion, while also providing strategic value for Coupang.”
Even if that full potential is not realized, Kim expressed optimism that the move “will prove to be a prudent financial decision,” as the online retailer strategizes to make Farfetch self-funding without further investment beyond the announced capital infusion.
Despite the huge investment, Kim noted that the company’s “bar for investments remains incredibly high” and will “only invest when we have conviction that our opportunities can reach meaningful scale and deliver high returns on capital.”
He pointed to several investments that are already showing progress such as its Fulfillment and Logistics by Coupang (FLC) offering in which it continues to make investments in infrastructure and technology.
An example of this commitment is the recent launch of its second fulfillment center in Taiwan, where it is leveraging artificial intelligence (AI) and machine learning (ML) to forecast and analyze customer demand effectively.
“We’re excited about the opportunity to challenge tradeoffs and wild customers in a geography with an attractive retail market. … We expect that to enable us to reach profitability in Taiwan faster than we did in Korea,” Kim remarked.
In total, the company reported an 80% surge in participating merchants within FLC, with over 80% being small and medium enterprises that lack access to physical retail shelves and the resources to develop their own technology and infrastructure.
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