Coupang expects net loss in first quarter due to rise of Chinese e-commerce

[Photo by MK DB]

Coupang Inc., a major South Korean e-commerce platform, faced a difficult situation in the first quarter of 2024, with a significant decline in operating profit and negative net profit for the first time in seven quarters.

The e-commerce giant announced on Wednesday that first-quarter sales rose 28% to 9.45 trillion won ($71.4 billion), exceeding 9 trillion won for the first time in its quarterly performance history. However, its profitability took a hit as it posted a net loss of 31.8 billion won, ending its sixth consecutive quarter of profits. Operating profit also plummeted to 53.1 billion won, down 61% from the same period last year.

Coupang's poor performance was mainly due to increased costs, especially in improving customer benefits, as Chinese e-commerce platforms such as Alibaba Group's AliExpress and PDD Holdings' Temu expand aggressively in the market. A $500 million investment to acquire US luxury fashion platform Farfetch in December 2023 also led to a loss of 150.1 billion won.

In response to the rise of Chinese e-commerce, the company announced plans to invest an additional 3 trillion won in logistics to support free shipping, increase the percentage of products made in Korea to 70%, and improve member benefits. did.

Coupang Chairman Kim Bum-seok (also known as Beom Kim) discussed the company's strategy in a post-earnings conference call, citing low barriers to entry for Chinese e-commerce companies and a growing trend among consumers to explore alternative shopping options. I admitted something. Kim outlined plans to expand product selection and customer investment, including plans to “increase investment in Korean products from 17 trillion won in 2023 to 22 trillion won this year.”

[Graphics by Song Ji-yoon]

Coupang is also focusing on expanding investment in logistics, and plans to invest more than 3 trillion won in the three years until 2026 to operate eight new logistics centers. The company also plans to expand its next-day delivery service to 50 million people nationwide by 2027, increase member benefits such as free shipping and returns, and increase customer benefits this year to 5.5 trillion won, up from 4 trillion won in 2023. The aim is to increase the amount by 40% to the won.

Dankook University professor Jeong Yong-sung stressed the need for Coupang to increase investment “in order to survive,” saying that if AliExpress and Tem continue to grow at their current pace, their sales in South Korea will total 8 trillion won. He said it could reach . From about 3 trillion won in 2023.

Written by Choi Jae-won and Jang Yi-chun

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