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Coupang Copies Amazon’s Business Model, Can it Copy its Profits Too?


  • Coupang IPO biggest Asian firm listed on Nasdaq since Alibaba, with shares priced above their initial target
  • Less clear what the prospects of Coupang will be, given its focus on the South Korean market and similar offering that will meet with stiff competition in markets outside its home market

We’ve all heard the stories, insane working hours, having to relieve yourself at your workstation because of quotas, and burning through billions of dollars in pursuit of market share.  But no, this isn’t Amazon (+1.83%), it’s a South Korean version called Coupang (+40.71%), and its IPO has been the biggest listing of an Asian firm on Nasdaq since Chinese e-commerce giant Alibaba Group Holding (+2.77%).

Dubbed “Korea’s Amazon,” Coupang, which is backed by SoftBank Group (+2.28%) and is now valued at over US$84 billion deserves the moniker as many of its services, though catered for the South Korean market, have been clearly inspired by Amazon.

From Rocket Delivery, which promises same-day delivery, to its doubling of net revenue in 2020 to US$12 billion, while still managing to turn in a loss of US$475 million, Coupang has all the hallmarks of an early Amazon, or does it? Amazon provided the world a precedent for what an e-commerce giant could look like.

Burning through money for the better part of a decade, Amazon chased market share and customer satisfaction in its early years, forsaking profitability.

And during that time, then-Amazon CEO Jeff Bezos would write regularly to investors sharing with them his grand vision of becoming the most dominant online retailer in the world, but that they would have to wait for profits to come, and for Amazon’s share price to reflect that. For those who waited, the bet on Amazon paid off, and handsomely.

Investors looking at Coupang today are left to wonder if this Asian-born Amazon wannabe could pull off the same stratospheric growth as Amazon and have priced it into shares of the company.

For starters, Coupang’s current market of South Korea is much smaller than Amazon in the United States and Alibaba in China. And one of Coupang’s core competencies, as described by founder and CEO Bom Kim at a 2019 panel discussion is its ability to customize solutions,

“Customizing our solutions around the constraints in the market to fulfill universal needs is really unique, and that’s really behind our growth.”

Which suggests that Coupang is intending to take on other geographical markets for its next stage of growth, localizing where necessary and tailoring processes for these markets. The only problem? Most of these other markets are either saturated or fragmented.

Take for instance Southeast Asia, a region of some 645 million people, but with as many as 11 different markets and one that Sea Ltd (+9.01%) a Singapore-headquartered e-commerce and gaming company dominates through its app Shopee.

Japan, China and the U.S. all have their own established e-commerce platforms and competitors have generally shied away from offerings directly competing with Amazon or Alibaba. So where will Coupang get its next phase of growth from? That is less clear.

Unlike Amazon, which was creating an entirely new market segment, the decade or so of losses could be contextualized, Coupang on the other hand is a bit of a tougher sell.

The company isn’t doing anything that hasn’t been done before and some of which it probably shouldn’t even do.

Despite Coupang’s popularity, it has faced increasing scrutiny after reports of several deaths among delivery and logistics staff who were allegedly overworked.

Sound familiar?

And hyper-localization is nothing new, with Amazon’s offerings in the various countries it operates in all tailored to suit domestic tastes. Even then, Amazon has exited markets as well, including China and struggled previously with Amazon Prime Now, a 2-hour grocery delivery service in India which it eventually shut down. Which is why it’s challenging to see where Coupang’s next stage of growth will come from.

Unlike the early 2000s when Amazon literally came to define and then dominate online shopping, that industry is now far more mature, and competitors lurk at every corner. At the same panel discussion in 2019, Kim said,

“What takes you to the next level is to not settle because customers will never settle. Challenge yourself and say, ‘how can you let the customer have it all?’ If the customer has it all, they can’t live without you.”

Words that could just as easily have come out of Jeff Bezos’ mouth in 2009. The only difference? Amazon today is wildly profitable, Coupang is not and warned that it may never be.

Investors would do well to take those warnings seriously.

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