After 17-Month Slog, Coupang Sees Light at the End of the Losses

It’s hard to imagine that Coupang — often called “the Amazon of South Korea” — had its best day 17 months ago, when it briefly touched $69 per share just moments after its hyped and historic IPO debut on the NYSE, a level and prestige factor that it has never come close to since.

Fast forward to today: while the eCommerce leader from Asia’s third-largest economy may be 60% (or more than $50 billion) smaller than it was at peak valuation, it is also getting closer to doing something else that it’s never done before — turning a profit.

“We provided guidance at the beginning of the year that we expected [adjusted losses] to be [around] $400 million for full year 2022,” Coupang CFO Gaurav Anand told investors on the company’s second-quarter earnings call Wednesday (Aug 10) afternoon. “We are now raising that guidance to achieve positive [adjusted earnings] for the full year,” he added in the wake of posting a comparatively modest $75 million Q2 loss that marked an 85% improvement from the $518 million it lost a year ago.

Relentless Consumer Focus

It hasn’t happened yet — but if Coupang’s plan works, the rise, fall and rebound of the fast-growing online retail and delivery platform could be one for the history books.

As much as Coupang’s troubled public life has been short, its origins date back to 2012, and founder and CEO Bom Kim said the company’s improving prospects at a time of worsening economic turmoil are the result of a “relentless consumer focus.”

“I cannot overstate what an incredible job the team did — not only the past couple of quarters, but the past couple of years of the pandemic — when we refused to compromise on customer experience and continued to make progress on the underlying operational excellence,” Kim said in response to analysts’ questions.  “Operational excellence is a part of our DNA.”

Pour on the Freebies

Not unlike Amazon’s recent uptick in perks, services, entertainment and membership fees surrounding its Prime membership, Coupang has followed a nearly identical path, where members of its equivalent WOW program find themselves paying a little more in fees to get a lot more in convenience and services, many of which are provided for free.

“We increased our investments in benefits for our customers in free services and exclusive discounts for our WOW members by over 50% to a record $500 million in Q2 alone,” Kim said, “and we continue to invest not only in low prices and fast delivery and richer experiences, but also in new benefits and services and offerings for the long term.”

Again, like Amazon, Coupang’s 3-year-old grocery delivery service, which happens to also be called Fresh, is already operating at a $3 billion annualized pace as a result of having some of the best adoption and engagement rates across the entire company, Kim said, calling the food unit’s selection and service that also comes with 7-day-a-week free delivery “the best value proposition in the market.”

“Customers love the convenience of ordering everything in a single checkout experience,” Kim said, calling the company’s combined economies of scale difficult to match for any offline retailer or standalone online fresh grocer.

“And Fresh is still far from its full potential,” Kim added, noting that the vast majority of Coupang’s 17.8 million active customers did not even make a single purchase from the grocery unit last quarter. “This highlights the significant opportunity we have to scale this offering in the years ahead,” he added.

Headwinds and Bumps

While Coupang is the first to admit that there will be bumps in the road going forward and that its path to profitability will be “a bit uneven” at times, Anand said that the recent ramp in profitability was encouraging and that he was confident the company would continue to grow significantly faster than the overall Korean eCommerce segment.

To that point, Coupang said Korea’s highly digitalized economy that is home to roughly 50 million people will continue to grow, as well as the company’s standing and share within it.

“In just three short years, by 2025, [South Korea’s] eCommerce segment is projected to exceed $290 billion in sales,” Kim told investors. “ While we’ve grown to significant scale, we remain a small portion of what is expected to soon become the third largest eCommerce opportunity in the world,” he said.

To win in that world, Bom said, Coupang’s growth will be powered by its relentless customer focus “that always strives to make experiences richer and prices lower for our customers,” he added.

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