SEOUL, South Korea – The small white delivery trucks drive in streets across South Korea. The uniformed workers send photos of safely delivered packages to impatient customers. Employers can move so fast, their employer promises, that it calls the service ‘rocket delivery’.
The trucks and the operation belong to Coupang, a company founded by a fallout from Harvard Business School, which has shaken up stores in South Korea. In a country where people are obsessed with ‘ppalli ppalli’, or getting things done quickly, Coupang has become a household name by offering groceries and millions of other messages with a next day and even ‘same day’. items at no extra cost.
The company, sometimes also called the Amazon of South Korea, will receive a major approval from Wall Street on Thursday. The shares are expected to trade in an initial public offering that will raise $ 4.2 billion and value the company at about $ 60 billion, the second largest U.S. rating for an Asian company after the Alibaba Group in China in 2014. On Wednesday, the shares were priced. according to a person close to the company at $ 35.
Coupang may need the money. South Korea’s large conglomerates, called chaebol, and others are building their own delivery networks while Coupang plans to expand them. It also faces other issues, such as the growing concern about working conditions following the deaths of several Coupang warehouses and delivery workers who blame some family members and labor activists for overwork and poor labor practices.
At present, Coupang is the largest e-commerce retailer in South Korea. Its status is further confirmed by people sitting at home during the pandemic and those in the country longing for faster delivery.
“I would not go so far as to say that I can not live without Coupang, because there are so many other online shopping options here that compete hard against each other, and some of them may be as fast as Coupang or cheaper,” said Kim Su-kyeong, a buyer and a mother in Seoul. “But Coupang has branded itself so well: it’s the name that comes to mind first when I think of buying online.”
As Bom Suk Kim, who started Coupang in 2010, would like to say: ‘Our mission is to create a world where customers wonder’ How have I ever lived without Coupang? ‘
Mr. Kim, 42, ran an unofficial and short-lived Harvard alumni magazine in the United States before returning to his home country to revolutionize his e-commerce business. Coupang’s rapid growth has been driven by a combination of daring entrepreneurship and branding.
The company’s name is a mixture of the English word “coupon” and “pang”, the Korean sound that hit the jackpot. In an industry where most delivery workers walk around in indescribable trucks with carrying jackets, Coupang’s fleet of full-time drivers – known as Coupang Men, but recently renamed Coupang Friends – wear bright uniforms and sail around in company-issued brands.
“Coupang has grown rapidly by meeting two key customer needs: cheap pricing and fast delivery,” said Ju Yoon-hwang, a professor of distribution management at Jangan University. “Coupang also offers more goods than competitors, so consumers believe they can find anything on Coupang.”
Only a few beginners – like Naver, the dominant web portal and search engine in South Korea, and Kakao, its leading messaging and online banking – were as successful as Coupang. But Naver and Kakao are both listed in South Korea. Mr. Kim took Coupang to Wall Street with the aim of appealing to larger investors and giving a higher valuation that enables his company to outperform its competitors at home.
South Korea is one of the world’s fastest growing e-commerce markets, expected to become the third largest in the world this year, behind only China and the United States. According to Euromonitor International, a market research firm, the volume, which was worth $ 128 billion last year, will reach $ 206 billion by 2024.
And it’s great for e-commerce. About 52 million people live in the country, the vast majority of them in densely populated cities. Almost every home has fast internet, and people pay taxes and gas bills with smartphones.
Long before e-commerce came along, South Korea already had a vibrant delivery culture. Families brought phone calls to have their food delivered 24 hours a day. Dry cleaners climbed stairs in apartment buildings to deliver freshly printed clothes. Motor couriers transported documents, flowers and more from one district to another.
Coupang’s first competitors were eBay-style marketplaces where customers found sellers. Deliveries were made by third-party logistics companies that contracted with independent couriers. Deliveries can take several days.
When Coupang launched its ‘rocket delivery’ service in 2014, it started a price and delivery war. It has since built up its own network of logistics hubs, with 70 percent of the population currently living within 7km of a Coupang logistics center, according to the company. The company says it uses machine learning to predict demand and inventory at warehouses. It also has its own fleet of 15,000 full-time couriers from Coupang Friend.
It also doubled its workforce to 50,000 in 2020, making it South Korea’s third largest private employer. It is planned to create 50,000 more jobs by 2025.
According to analysts, Coupang borrowed from Amazon’s playbook by becoming a dominant market power before making a profit. The company’s revenue nearly doubled last year to $ 12 billion. But its massive investments in its logistics network, made possible by the financing of foreign investors such as the SoftBank and its Vision Fund of Japan, keep it in the red. Its annual net loss rose to $ 1 billion in 2018 before increasing to $ 475 million last year.
It recently launched Coupang Eats, a meal delivery service, and Coupang Play, a video streaming app. But unlike Amazon, Coupang does not have other businesses, such as cloud computing, that can easily generate the money needed for large expansions. And competitors are setting up fierce competition.
Some of the chaebol, the family-run conglomerates that dominate the economy, are expanding their e-commerce business, most notably Lotte and Shinsegae, which operate the country’s largest department store and shopping center chains. So does Naver, which is already an e-commerce giant.
As competition intensifies, super-fast delivery is fast becoming the new norm, weakening the novelty of Coupang’s ‘rocket delivery’ service.
Coupang also investigated his labor practices. Former Coupang workers and labor activists accuse the company of exploiting its warehouse workers in its mad rush to turn orders around as quickly as possible.
As the number of workers doubled, the number of people suffering from work-related or illnesses in Coupang and its warehouses rose from 515 in 2019 to 982 in 2020, according to government data.
“Coupang is an inhuman enterprise that treats its workers like slaves or machine parts and pushes them to the last drop,” said Park Mi-sook, whose son, Jang Deok-joon, died of a heart attack in October last year. after his return home. from an overnight shift at a Coupang warehouse. His death is definitely a work-related incident, and Coupang, meanwhile, has apologized.
Coupang denied that he abused his workers. Last year alone, he said, he invested $ 443 million in the automation of his warehouses and increased his workforce by 78 percent to 28,400 to make his workers more efficient and reduce the workload.
“What made Coupang’s delivery of rockets possible was its massive employment and investment,” the company said in a statement.
And it continues to position itself as an essential service for busy South Koreans.
In a letter to potential investors, Mr. Kim suggested an example of a major Coupang buyer: a working mother who realizes late at night that she forgot to go shopping, and then places an order online via Coupang.
“When she opened her eyes, it’s like Christmas morning,” he said. Kim wrote. “The order is waiting at her front door.”