Will CJ, Coupang mend strained ties?
Coupang, Korea’s largest e-commerce firm, is sending a conciliatory gesture to CJ Group by inviting its leader to an upcoming Major League Baseball (MLB) game in Seoul, in a potential move to end their years-long war of nerves amid the burgeoning presence of Chinese retailers here, according to industry officials, Thursday.
The invitation came as a surprise, as their bilateral relations showed little signs of mending after CJ clinched retail partnerships with AliExpress and Naver. CJ discontinued a supply contract for its best-selling food products with Coupang in November 2022 amid their disagreement regarding the unit price of supplied items.
CJ Group Chairman Sohn Kyungshik, who is also chairman of the Korea Enterprises Federation, has accepted the invitation from Coupang CEO Kang Han-seung, which raised the possibility that both sides will be able to mend their long-frayed ties.
Coupang is dominant in the local retail industry, but its leadership is being threatened by emerging foreign e-commerce firms, particularly from China.
Coupang’s monthly average users (MAU) surpassed 30 million as of the end of February, according to market tracker WiseApp. But of particular note is the triple-digit MAU growth of AliExpress here. The figure for the Chinese e-commerce firm reached 8.18 million during the same period, up 130 percent from a year earlier.
Industry officials said Coupang will not be able to maintain the upper hand in future negotiations with food firms — such as CJ — and a group of other big product suppliers, amid the growing threats from Chinese rivals.
“Coupang was able to press its suppliers to cut their unit prices for the past few years, due to the absence of rivals, but the status quo shows otherwise,” an official from a local retail firm said. “Buyers of foods and daily necessities are more sensitive to prices than any other factor.”
“AliExpress’s key downside was its weak product reliability, but after it started selling popular Korean brand products at cheap prices, no one can say for sure that Coupang will be able to maintain its dominance sustainably.”
LG Household & Health Care also suspended ties with Coupang for a similar reason as CJ, but both sides resumed their transactions in January by readjusting the unit prices for products from the LG affiliate.
Officials from both firms declined to give specific comments as to the upcoming meeting between the two top executives.
Another official from a retail firm raised the likelihood for such big suppliers to gain better negotiating ground with Coupang if AliExpress keeps increasing its presence.
“More customers will flock to the Chinese e-commerce platform if it keeps holding strong promotional campaigns for popular Korean products,” the official said. “For Korean suppliers, the rise of AliExpress and foreign e-commerce firms will come as a boon, as they can distribute their products to diverse channels and gain stronger bargaining power with the retail market leader.”