Upward Trend
The possibility of Coupang achieving annual profitability has grown stronger. The company achieved its highest-ever quarterly revenue and operating profit in the second quarter of this year, continuing its streak of four consecutive quarters of profitability.
According to Coupang’s second-quarter earnings report filed with the U.S. Securities and Exchange Commission (SEC) on Aug. 9, the NYSE-listed company recorded sales of 7.6749 trillion won (US$5.83788 billion at an exchange rate of 1,314.68 won per dollar) and operating profit of 194 billion won (US$147.64 million) in the second quarter of this year. This reflects a 21 percent surge in sales compared to the same period last year and a 42 percent increase in operating profit compared to the first quarter.
Despite a climate of reduced consumer spending due to high inflation, Coupang achieved its all-time highest quarterly performance. This stands in contrast to the predicted sluggish performance in the second quarter for domestic department stores and large-scale retailers within the distribution industry.
After releasing its earnings, Coupang emphasized during a conference call, “While the domestic distribution market grew by 3.1% in the second quarter of this year, Coupang experienced a remarkable 21% growth during the same period. Our growth extends not only to Rocket Delivery but also encompasses emerging sectors such as fashion, beauty, marketplace in the form of open markets, and Rocket Growth, which provides next-day delivery for products from various sellers.”
With an adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of US$322 million, the company achieved a significant milestone by surpassing the US$300 million mark for the first time. Notably, there’s evident improvement in profitability. The cumulative surplus cash flow over the 12 months reached US$451 million in the first quarter, marking the company’s first profitable quarter, and then expanded to US$1.1 billion in the second quarter.
The user count has witnessed growth as well. During the second quarter, the number of active customers who made at least one purchase reached 19.71 million, showcasing a 10 percent rise in comparison to the previous year’s corresponding period. Per capita revenue amounted to US$296 (approximately 390,000 won), signifying a 5 percent increase. Coupang self-appraises as being on the brink of the “era of 20 million customers.”
The Chairman of Coupang’s Board of Directors said, “With growth in revenue, profits, and customer base, we have achieved the largest cash flow in our history.” He also noted, “However, despite this growth, Coupang’s market share in the domestic distribution market remains in the single digits, and we consider this to be just the beginning.”
According to EuroMonitor, the size of the domestic distribution market in South Korea, including dining and travel, is estimated to be around 602 trillion won, and Coupang holds a market share of about 4.4 percent. The domestic distribution market is expected to expand to over 700 trillion won within the next three years.
Coupang has recently been focusing on bolstering its fashion and beauty divisions. They are intensifying their efforts in the luxury beauty category and taking proactive measures to ensure fair competition and oversight of their competitors, such as reporting the market-leading cosmetics distributor, CJ Olive Young, to the Fair Trade Commission.
Chairman Kim also highlighted this point during the conference call as well. He stated, “Even the fashion and beauty segments, which have begun Rocket Delivery service just a few years ago, are experiencing growth at a much faster pace than our overall business. Although it’s been less than a decade since we started the retail (Rocket Delivery) business, we still possess a strong driving force for growth.”
Chairman Kim has revealed that Coupang plans to invest US$400 million in new ventures this year, including in its Taiwan Rocket Delivery service launched in October of last year, the online video streaming service (OTT) Coupang Play, and the delivery platform “Coupang Eats.” The combined depreciation and amortization-related operating losses for these new ventures in the second quarter amounted to US$173.7 million, more than triple the figure from the same period last year. A representative from Coupang explained, “This increase signifies the heightened investment in these new ventures.”
Chairman Kim emphasized, “We have rigorous standards for new venture investments, and we are prepared to halt investments that do not meet these criteria. Our Taiwan venture has surpassed our investment benchmarks.” He also noted, “The growth rate of our Taiwan operations is significantly faster than when we first introduced Rocket Delivery service in Korea.”
Coupang has also unveiled its plans to expand its premium membership services. Starting from April, the company has been offering a 10 percent discount on Coupang Eats delivery fees for members of its paid “Wow Membership” program. Chairman Kim said, “In regions where delivery fee discounts are applicable, Coupang Eats’ market share has seen an average increase of over 5 percent. We have decided to include unlimited Coupang Eats discounts as a regular perk of Wow Membership.”
He also stated, “Coupang has reinvested the surplus generated from our profits to offer a benefit for Wow members, allowing them to enjoy up to a 10 percent discount on every order without limitation. In regions where the Eats discount was introduced, the total number of Wow members using Eats increased by 80 percent, and the average spending also grew by 20 percent.”