Coupang poses growing threat to Shinsegae, Lotte
Coupang’s stronger-than-expected performance is posing an increasing threat to two of Korea’s long-standing retail powerhouses — Shinsegae and Lotte — as the e-commerce giant is gaining ground against conventional offline retail channels at a rapid pace, according to data and industry officials, Wednesday.
The 2023 earnings report from Coupang displays the ongoing retail paradigm shift that is driven by e-commerce. According to the firm’s regulatory filing, Coupang achieved a long-awaited turnaround in 2023 for the first time in 13 years after it was established in 2010.
The company said it generated an annual operating profit of $470 million (627.7 billion won) last year. Its sales also topped 30 trillion won for the first time in its history, up by more than 20 percent from the previous year. This was buoyed by the strong purchasing power of its subscription-based users whose number tops 14 million.
Industry officials said that Coupang’s influence across the online retail industry will grow further, as its unmatched super-fast Rocket Delivery and Rocket Fresh services gain growing traction with customers here.
“One of Coupang’s core strengths is the fast delivery service, and its coverage area is widening rapidly, from daily necessities to fresh foods,” an official from a local retail channel said.
However, this is not the case for offline retail business operators which have experienced declining sales during the same period, hit by the rise of e-commerce and the weakening price competitiveness of offline retailers.
This is indicated by the earnings reports of Shinsegae and Lotte. According to a recent regulatory filing from E-Mart, the nation’s largest supermarket chain, operated by Shinsegae Group, the firm reported an operating loss of 46.9 billion won last year. Sales of Lotte Shopping also reached 15.55 trillion won during the same period, falling far short of Coupang’s.
Industry officials said the paradigm shift toward e-commerce is inevitable. Yet, Coupang has a crucial task ahead of it as it looks to reduce its accumulated losses, which have surpassed 6 trillion won.
“Coupang’s rapid inroads into the retail sector were driven by its robust investment to establish strong logistics systems, which led the company to incur enormous losses for the past few years,” an official from a retail company here said on condition of anonymity. “This is the key reason behind the firm’s weak stock performance.”
According to the New York Stock Exchange, Coupang’s stock price has shown no clear signs of a rebound for more than a year now. It came close to $50 per share soon after its listing in March 2021, but rapidly lost momentum and has been hovering at less than $20 for the past two years.
Another official from a conventional retail firm, however, said that Shinsegae and Lotte have established stable revenue structures over the past few decades, so it remains premature to say that they will end up falling to Coupang in the retail sector overall.
“Coupang places its sales items on daily necessities or groceries, but the traditional retail firms still have competitive edges in attracting customers’ attention by holding diverse experiential events through their offline sales channels,” the official said.