Wednesday, September 26, 2018
Coupang Posts 1.7 Trillion Won in Losses for 3 Years
Drowning in Red Ink
Coupang Posts 1.7 Trillion Won in Losses for 3 Years
  • By Yoon Young-sil
  • April 17, 2018, 11:45
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Coupang posted the biggest-ever operating loss of 600 billion won (US$560.22 million) last year.
Coupang posted the biggest-ever operating loss of 600 billion won (US$560.22 million) last year.

 

Coupang Inc. recorded its cumulative operating loss of 1 trillion won (US$931.53 million) until 2016. Regarding to the huge loss, the company has said this is not a problem since it is the investment they are making to grow sales as U.S.-based Amazon did before.

Such Coupang’s challenge has been put to the test once again. The company posted the biggest-ever operating loss of 600 billion won (US$560.22 million) last year, falling into a state of capital impairment. Coupang was able to claw its way out of capital impairment after attracting 400 billion won (US$373.48 million) of investment from global investment companies, such as BlackRock and Fidelity Investments, again. The market is paying attention to whether Coupang can succeed in growing as Amazon has turned into profit-making after dominating the market through expansion in size.

According to an audit report on April 16, Coupang posted 2.68 trillion won (US$2.51 billion) in consolidated sales and 638.8 billion won (US$596.45 million) in operating profits last year. Its sales jumped as much as 40.1 percent compared to the previous year, reaching a record high again. Coupang ranks first in the e-commerce industry in terms of sales. However, the company’s operating losses also showed a whopping 13 percent growth, hitting a record high.
 

The problem is that Coupang was once in the state of capital impairment at the end of last year. The company said it got out of capital impairment this year by increasing capital of its subsidiary in the U.S. through the investment attraction. According to the audit report, the total capital of Coupang stood at minus 244.6 billion won (US$228.38 million) as of the end of last year. It means that the company ran out of US$1 billion (1.1 trillion won) of investment attracted from SoftBank Group in 2015. An official from Coupang said, “We made an additional capital increase after completing auditing. Based on this, we have secured 813 billion won (US$759.1 million) of cash now.”

In regard to the biggest-ever losses, Coupang keeps saying that operating losses are not a big problem. It says it is the losses from the investment. According to Coupang, the company recently completed its 54 logistics networks across the nation that allow to deliver millions of products a day for its popular Rocket Delivery service. It said it can now deliver more than 7 million types of products through the Rocket Delivery service.

However, there is a growing skepticism whether Coupang’s strategy will work in the South Korean market as the company has seen its losses pile up. This is also due to the fact that the competition is getting stronger in the domestic e-commerce market. Unlike the 1990s when Amazon didn’t have many competitors in the market, the domestic e-commerce market is currently in a state of saturation.

Meanwhile, other leading e-commerce firms ensured internal stability last year as they increased sales while reducing losses. WeMakePrice saw its operating losses drop 34 percent to 41.7 billion won (US$38.98 million) and its sales grow 28 percent to 473.1 billion won (US$442.23 million) last year. Ticket Monster posted 356.2 billion won (US$332.87 million) in sales and 113.3 billion won (US$105.88 million) in operating losses, up 35 percent and down 28.2 percent, respectively, from a year ago. ebay Korea also showed a 10.3 percent increase in sales to 951.8 billion won (US$889.45 million) but a 6.9 percent decrease in operating profits to 62.3 billion won (US$58.23 million).