Coupang Prioritizes Deepening Customer Engagement Over Acquisition

Around the world, eCommerce companies look to grow their share of consumers’ overall retail spending.

For Coupang, the real opportunity lies in boosting current customers’ spending more than gaining new shoppers.

The multinational eCommerce company shared in its second-quarter 2024 earnings results, reported Tuesday (Aug. 6), that even amid a 12% year-over-year increase in active customers, the real growth driver has been the rising expenditure of those who are already engaged.

“While new customers contribute to future growth, our growth today and tomorrow is powered primarily by the increasing spend of our existing customers,” Coupang founder and CEO Bom Kim told analysts on a conference call. “And we believe our future growth opportunity is massive and largely untapped because we still account for a small percentage of overall retail spend, even of our oldest and best customer cohorts. That’s why all of our customer cohorts continue to increase their spend, even our oldest and highest-spending cohorts.”

Especially strong has been the performance of the company’s marketplace business. The segment has outpaced first-party sales for 13 consecutive quarters. The surge in marketplace sales, particularly among sellers that are small– to medium-sized businesses (SMBs), indicates a growing consumer preference for a wider variety of products and the increasing importance of platform diversity.

If the United States is any indication, many consumers do indeed prefer third-party channels, per the PYMNTS Intelligence study “How Preferred Payment Availability Can Reduce Cart Abandonment.” The report, which drew from a survey of more than 3,500 U.S. consumers, indicated that shoppers are likeliest to choose marketplaces (compared to brands’ or retailers’ sites or apps) for a variety of retail purchases. They prefer third-party channels for electronics, furniture or appliances; and clothing or accessories. Only in grocery did shoppers say they prefer retailers’ sites or apps.

Losses by the Hundreds of Millions of Dollars

While sales may be on the rise, the company is burning more cash than it is taking in. Gross profit margins improved, reaching 29.3% in Q2. This improvement, driven by operational efficiencies and higher-margin product sales, is a positive indicator. However, the company’s overall net loss of $105 million and a $121 million administrative fine underscore ongoing financial and regulatory hurdles.

Coupang’s Developing Offerings segment, encompassing ventures like Coupang Eats and Farfetch, demonstrated revenue growth of 472% year over year. Yet, this segment continues to grapple with substantial losses, reflecting the high costs associated with scaling new services and integrating acquisitions. The negative adjusted EBITDA of $200 million in this segment, exacerbated by Farfetch’s ongoing operational challenges, highlights the financial strain of the company’s moves to expand into new markets and services.

Marketplaces Fuel SMBs’ Growth

The rapid growth of Coupang’s marketplace, with over 9,000 SMBs graduating from small businesses to larger enterprises, also reflects a broader trend of digital platforms giving a platform to smaller players, although the downsides of relying on third parties can be considerable.

Still, the same platforming effect can be seen in the United States with Amazon, as Pawstruck CEO Kyle Goguen told PYMNTS last month.

“What Amazon allowed me to do was grow extremely fast and build a sizable business without a bunch of capital needed,” Goguen said. “To grow as fast as we did, I would have had to rent out a huge warehouse, hire a warehouse staff and manage them, or hire middle management to manage them.”

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