Korean billionaire will become the second Jack Ma?

Coupang founder Bom Suk Kim is not as well known as Jack Ma. Korean e-commerce firm has just issued shares for the first time (IPO) very successfully in New York (USA).

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Mr. Bom Suk Kim is not considered a “business hero” like Jack Ma, a famous Chinese businessman. However, Coupang’s listing on Wall Street has been the largest IPO of a foreign company on the New York Stock Exchange since Jack Ma’s Alibaba launched in 2014.

Follow CNN MoneyCoupang’s share price ended the first session on March 11 at the same level 49.25 USD, 41% higher than the IPO price (35 USD). The IPO helped the company nicknamed “Amazon of Korea” mobilize 4.6 billion USD. Coupang’s market cap skyrocketed $ 84.5 billion. Thanks to that, Bom Kim – founder and CEO of Coupang – became the fourth richest person in Korea with a fortune. $ 8.6 billion.

Like Alibaba, Coupang is backed by Japanese billionaire Masayoshi Son’s SoftBank Group. However, Coupang does not have a huge domestic market like Alibaba. China is the world’s second largest e-commerce market by scale 1,800 billion USD.

Meanwhile, Coupang operates mainly in Korea, the sixth largest market in the world with a turnover of about 74 billion USD.

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Mr. Bom Suk Kim founded Coupang 11 years ago. Photo: Bloomberg.

Drop out of Harvard

That’s not the only problem the Coupang has faced. The company has never reported profit despite its rapid growth in revenue. Coupang may also be subject to the South Korean government’s tight control over working conditions following the death of a deliveryman earlier this week.

Founder Kim dropped out of Harvard Business School and founded the company 11 years ago. “We are here today because we focus on a strategy, a long-term vision. We have a team and shareholders that are in line with that vision. We will continue to be consistent with this DNA.” answered the billionaire Bloomberg on the same day as the IPO.

The Coupang was even more successful than expected. The company intends to sell its shares at just 27-30 USD. However, the participation of banks such as Goldman Sachs, Citigroup and UBS has made shares of “Amazon Korea” more attractive to investors.

The IPO was also a success for SoftBank. The Group’s Vision Fund has invested 3 billion USD in Coupang and holds a 33.1% stake. After the first trading day, the fund’s shares increase in value up to 28 billion USD, more than 9 times the initial investment. Other major shareholders are Greenoaks Capital Partners with 16.6% of the shares and Mr. Kim (10.2%).

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Coupang Korea is considered to pay attention to every little detail to attract customers. Photo: Nikkei Asian Review.

Before the IPO, Coupang was considered to pay attention to every little detail to capture the Korean e-commerce market. For example, the delivery staff will knock on the door gently instead of ringing the bell when delivering baby diapers. The company also offers programs to protect the environment.

“I am very pleased that (Coupang) is very fast delivery. The bags are reusable so I don’t need to worry about destroying the environment,” said user Kang Yu-rok.

Along with that, the Rocket Delivery 24h delivery service also helps Coupang become the largest online retailer in Korea, attracting nearly 15 million customers in the country of 52 million people.

The company said it is capitalizing on the growth of the Korean e-commerce market. According to official data, total online retail transactions in the country increased from 135,000 billion won in 2019 to 161,000 billion won ($ 142 billion) 2020.

Never been profitable

Coupang’s growth was even greater. The company’s net retail sales increased from $ 5.8 billion year 2019 up 11 billion USD 2020. Revenue per customer is also climbing steeply from 161 USD up 256 USD. However, the company is still not profitable. The company recognizes operating losses 527.7 million USD in 2020, down from 643.8 million USD year 2019 and 1.1 billion USD year 2018.

Chronic losses may not be a big deal for Coupang, as long as losses are dwindling, analysts say. “The value of online retailers is not determined by short-term profitability, but by market share. In other words, it is revenue and customer base,” said Park Jong-dae, an analyst at Hana Financial. Investment comment.

In addition, its dominant position in the domestic commercial market also helps the company cut down on purchasing costs.

According to Professor Shin Jang-sup at the National University of Singapore, Japanese billionaire Masayoshi Son’s Vision Fund has helped Coupang have a good reputation in New York. “New York investors value Coupang very highly. Because they believe in the success of the Vision Fund,” he added.

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Coupang is still unprofitable despite strong sales. Photo: Nikkei Asian Review.

However, after a good start in New York, Coupang still faced a big problem. Its biggest strength – the Rocket Delivery system – is too expensive. The company needs to maintain 100 logistics centers in 30 cities.

To set up these centers, Coupang spent 485 million USD buy land and facilities by 2020. Even so, the company believes this expensive model will be profitable in the long run.

“We have and will continue to make substantial investments in technology and infrastructure networks to attract new customers and sellers,” Coupang said in a filing to the US Securities and Exchange Commission.

“These investments will be the main drivers of our long-term growth and competitiveness. However, they could have a negative impact on operating margins in the short term,” the company said. more.

The company said it is planning to invest $ 870 million to build 7 more centers in the next few years.

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Total online retail transactions in the country have increased from 135,000 billion won in 2019 to 161,000 billion won (142 billion USD) in 2020. Photo: Nikkei Asian Review.

Follow Nikkei Asian Review, Coupang spends heavily on express delivery to maintain its position in the increasingly fierce competition. According to the Korean Industry Ministry, there are currently 13 e-commerce companies in the country, including foreign companies and a partnership between online retailer 11Street and Amazon.

Workers’ working conditions were another issue for Coupang. The company owns the largest directly recruited staff in Korea with more than 15,000 drivers.

However, at least two cases of Coupang employees died in the past have questioned working conditions. On March 8, labor organizations reported the death of a Coupang delivery worker from overwork. However, the company denied this allegation.

Coupang is not the only company facing these controversies. In December 2020, a contract delivery employee of – a subsidiary of Alibaba – died while delivering the 34th order of the day.

“For Mr. Kim, these are just some of the challenges that he must tackle if he wants to be the next Jack Ma”, Nikkei Asian Review comment.

According to Zing


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