Focus: S.Korean e-commerce firm Coupang stretched by order surge as coronavirus cases jump

E-Mart

04/03/2020 23:00

* Daily deliveries climb to 3 mln vs 2.2 mln in late 2019
    * Coupang utilising more part-time workers to cope 
    * Coupang's earnings history shows losses grew as sales
surged

    By Joyce Lee and Heekyong Yang
    INCHEON, South Korea, March 5 (Reuters) - 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  9984.T  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  023530.KS  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
 139480.KS , 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  EBAY.O  South Korean
unit and online search portal Naver Corp  035420.KS  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 focused
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." 

 (Reporting by Joyce Lee and Heekyong Yang; Additional reporting
by Hyunjoo Jin; Editing by Jonathan Weber and Edwina Gibbs)
 ((jungyoon.lee@tr.com; +82 2 6936 1467;))