Offering New User Experiences Through Partnerships
The author is an analyst of Shinhan Investment Corp. He can be reached at mj1224@shinhan.com. -- Ed.
Five strategies for growth of commerce business
NAVER unveiled the strategic direction for its commerce business at the Analyst Day event held on March 17. The five growth strategies are: 1) improvement of seller solutions; 2) diversification of purchasing methods; 3) development of partnership ecosystem through membership programs; 4) establishment of data-based on-demand delivery fulfillment services; and 5) expansion into overseas markets.
The company aims to increase the number of NAVER Smartstore sellers from 420,000 as of 2020 to 1mn by 2025. The target for Smartstore transaction value is set at KRW25tr (+45.3% YoY) for 2021. NAVER also plans to focus on reinforcing its Brandstore operations, aiming to expand the number of shops from current 290 to over 500 by the year’s end. Key focus will be placed on introducing a wide variety of merchant solutions for the development of a strong commerce ecosystem. In addition, the company targets to expand Smartstore operations to Japan and Southeast Asian countries to open up global opportunities for its small/mid-size sellers.
New user experiences offered through partnerships
NAVER is working with partners from different business backgrounds to offer new user experiences and expand the commerce ecosystem. Alliances with CJ Logistics, logistics startups, and Shinsegae have allowed the company to make up for its weaknesses in delivery systems and fresh-food/luxury goods.
Partnering with CJ Logistics, NAVER has been testing a speedy delivery service since 2020. The trial run completed with eight Brandstore merchants yielded an overnight delivery rate near 99%. The company plans to make the speedy delivery service available to 100 Brandstore merchants within this year and increase the total handling volume by 90x by 2023. Going forward, NAVER seeks to ship products within three hours of order placement by utilizing offline E-Mart stores as urban logistics centers and working with delivery service providers such as Vroong and LOGiALL. The company has also joined hands with logistics startups to provide a wider range of delivery services to meet diverse delivery needs.
Additional positive points noted from the company's strategic plans include membership benefits tailored to each user, offered through partnerships with various membership programs such as Shinsegae reward points, Tving, and airline frequent-flyer programs.
Target price raised to KRW520,000
We raise our target price for NAVER by 20.9% from KRW430,000 to KRW520,000. Our estimate of the company’s enterprise value, which has remained undervalued to date, is revised upward in reflection of Coupang’s high valuation at its IPO. Data from WiseApp shows that NAVER Shopping was on par with Coupang in terms of transaction value growth in January this year. With NAVER reinforcing its weak points with partnerships on various fronts, we find no reason for shares to remain undervalued vs. peers.