SEOUL, South Korea – Small white delivery trucks pass through the streets of all over South Korea. Uniformed workers send photos of packages delivered safely to impatient customers. Workers can move so fast, promises their employer, who calls the service “rocket delivery”.
The trucks and the operation are owned by Coupang, a start-up founded by a dropout from Harvard Business School that shook purchases in South Korea, an industry long dominated by huge button conglomerates. In a country where people are obsessed with “ppalli ppalli” or getting things done quickly, Coupang has become a household name by offering “next day” and even “same day” and “dawn” delivery of groceries and millions other items at no extra cost.
The company, which is sometimes called the South Korean Amazon, is expected to receive a major endorsement from Wall Street on Thursday. Its shares are expected to begin trading in an initial public offering that will raise $ 4.2 billion and will value the company at around $ 60 billion, the second largest American count for an Asian company after the Alibaba Group of China. in 2014. On Wednesday, its shares were quoted at $ 35, according to a person close to the company.
Coupang may need the money. South Korea’s large conglomerates, called chaebol, and others are building their own distribution networks while Coupang plans to expand. He also faces other problems, such as growing concerns about working conditions after the death of several Coupang depot and delivery employees, which some relatives and labor activists have attributed to overwork and inappropriate work practices.
At the moment, Coupang is South Korea’s largest e-commerce retailer, its status further cemented by people trapped at home during the pandemic and those in the country who crave faster delivery.
“I don’t go so far as to say that I can’t live without Coupang, because there are so many other online shopping options available here competing fiercely with each other, and some of them can be as fast as Coupang or cheaper,” said Kim Su-kyeong , a buyer and mother of Coupang in Seoul. “But Coupang has such a good brand that it is the name that first comes to mind when I think of online shopping.”
As Bom Suk Kim, who founded Coupang in 2010, likes to say: “Our mission is to create a world where customers ask themselves, ‘How did I live without Coupang?’”
Kim, 42, ran an unofficial and ephemeral magazine of Harvard alumni in the United States before returning to his home country to revolutionize his e-commerce industry. Coupang’s rapid growth was driven by a combination of bold entrepreneurship and branding.
The name of the company is a mixture of the English word “coupon” and “pang”, the Korean sound to hit the jackpot. In an industry where most delivery workers drive in nondescript trucks wearing drab jackets, Coupang’s fleet of full-time drivers – known as Coupang Men, but recently renamed Coupang Friends – wears shiny uniforms and drives in private-label vehicles.
“Coupang has grown rapidly in response to the two most important customer needs: cheap prices and fast delivery,” said Ju Yoon-hwang, professor of distribution management at Jangan University. “Coupang also offers more products than competitors, so consumers believe they can find anything at Coupang.”
Only a few start-ups – such as Naver, South Korea’s main portal and search engine, and Kakao, its leading messaging app and online bank – have been as successful as Coupang. But Naver and Kakao are listed in South Korea. Kim took Coupang to Wall Street with the aim of courting bigger investors and a higher valuation that would allow his company to eclipse its rivals at home.
South Korea is one of the fastest growing e-commerce markets in the world, projected to become the third largest in the world this year, behind only China and the United States. Its volume, valued at $ 128 billion last year, is expected to reach $ 206 billion by 2024, according to Euromonitor International, a market research company.
And it is ideal for e-commerce. About 52 million people live in the country, the vast majority of them in densely populated cities. Almost all homes have high-speed internet and people pay taxes and gas bills with smartphones.
Long before the arrival of e-commerce, South Korea already had a vibrant delivery culture. Families made phone calls to have their food delivered 24 hours a day. Dry cleaning workers climbed stairs in apartment buildings to deliver freshly ironed clothes. Motoboys transported documents, flowers and other decorations from one district to another.
Coupang’s first rivals were eBay-style markets, where customers met sellers. Deliveries were made by third-party logistics companies that hired independent carriers. Deliveries can take several days.
When Coupang started its “rocket delivery” service in 2014, it started a price and delivery war. Since then, it has built its own network of logistics centers, with 70 percent of the population now living 11 kilometers from a Coupang logistics center, according to the company. The company says it uses machine learning to forecast demand and store goods in warehouses. It also operates its own fleet of 15,000 Coupang Friend messengers full-time.
It also doubled its workforce to 50,000 in 2020, making it South Korea’s third largest private sector employer. It plans to create an additional 50,000 jobs by 2025.
Analysts said Coupang borrowed the manual from Amazon as he sought to become a dominant force in the market before making a profit. The company’s revenue almost doubled last year, to $ 12 billion. But his massive investments in his logistics network, made possible by financing foreign investors like Japan’s SoftBank and its Vision Fund, have kept him in the red. Its annual net loss skyrocketed to $ 1 billion in 2018, before dropping to $ 475 million last year.
It recently launched Coupang Eats, a meal delivery service, and Coupang Play, a video streaming application. But unlike Amazon, Coupang has no other businesses, such as cloud computing, that can easily generate the money needed for major expansions. And rivals are putting up fierce competition.
Some of the chaebol, conglomerates controlled by families that dominate the economy, are expanding their e-commerce businesses, especially Lotte and Shinsegae, which operate the country’s largest department stores and shopping mall chains. Naver too, which is already an e-commerce giant.
As the competition heats up, super fast delivery is quickly becoming the new norm, weakening the novelty of Coupang’s “rocket delivery” service.
Coupang also faced scrutiny about his labor practices. Former Coupang workers and labor activists accuse the company of exploiting its warehouse workers in its mad rush to fulfill orders as quickly as possible.
As the number of workers doubled, the number of people who suffered work-related injuries or illnesses in Coupang and their deposits jumped to 982 in 2020 from 515 in 2019, according to government data.
“Coupang is an inhumane company that treats its workers like slaves or machine parts, squeezing them to the last drop,” said Park Mi-sook, whose son, Jang Deok-joon, died of a heart attack last October, shortly after returning home from a night shift at a Coupang warehouse. His death was considered a work-related incident, and Coupang has since apologized.
Coupang denied having mistreated his workers. Last year alone, she said, she invested $ 443 million in the automation of her warehouses and increased her workforce by 78 percent, to 28,400, to make her workers more efficient and reduce the workload.
“What made the delivery of the Coupang rocket possible was its massive employment and investment,” the company said in a statement.
And it continues to present itself as an essential service for busy South Koreans.
In a letter to potential investors, Kim presented an example of a quintessential Coupang buyer: a working mother who, late at night, realizes that she forgot to go shopping and then places an order online through Coupang.
“When she opens her eyes, it’s like Christmas morning,” wrote Kim. “The order is waiting at her front door.”