A Member of Pat McKeough’s Inner Circle recently asked for his advice on Coupang, a vertically integrated logistics and technology network which provides end-to-end retail and delivery services primarily in South Korea and Taiwan.
Pat likes the firm’s strong logistical moat. By owning the entire supply chain from the massive fulfillment centers to the “last-mile” delivery trucks, the company has achieved an exceptional level of customer loyalty and delivery speed. Furthermore, the Taiwan expansion represents a big growth area. However, Pat notes the company faces persistent and intense competition while serving a very regional market.
Coupang Inc. (Symbol CPNG on New York; www.aboutcoupang.com) is South Korea’s largest e-commerce company.
Often called the “Amazon of South Korea,” Coupang was founded by Bom Suk Kim, a graduate of Harvard University, who went on to Harvard Business School before dropping out after six months to return to South Korea and start the delivery platform in 2010.
The company launched its IPO and began trading on New York on March 10, 2021. That’s when it sold shares at $35 each.
Coupang provides retail, restaurant delivery, video streaming and financial technology services (fintech) to customers around the world. The company’s brands include Coupang, Coupang Eats, Coupang Play and Farfetch.
Coupang’s primary market is South Korea. There, the company offers dawn and same-day delivery through over 100 fulfillment centres. Customers can order fresh groceries and choose from millions of general merchandise items by midnight and receive products by 7 am next morning. Through its next-day delivery program, customers are eligible for free, one-day delivery nationwide 365 days a year.
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Coupang introduced its brand in Taiwan in 2021. Since then, the company has opened three fulfillment centres in the country. There, it offers next-day delivery, and customers can order food and daily consumables for overnight delivery.
In January 2024, Coupang acquired Farfetch Holdings plc, a global online marketplace for luxury fashion. Farfetch aims to connect customers in more than 190 countries and territories with some of the world’s best boutiques and brands.
Coupang operates through two business segments: Product Commerce, which includes its core Korean retail and marketplace offerings and fresh grocery offerings; and Developing Offerings, which include new offerings, including Coupang Eats, Coupang Play, fintech, the company’s streaming service in Korea, and its retail operations in Taiwan.
The capabilities Coupang has built up over the years have let it expand into new offerings and geographies. Last year, for example, the company added prominent beauty brands such as Kiehl’s, Dolce&Gabbana and Jo Malone. Across other categories, it has added Swarovski, Conver, Wedgwood, Royal Copenhagen and Nespresso.
Coupang is also making quick progress in expanding its selections in Taiwan. The company has teamed up with global suppliers, including PepsiCo, P&G and Unicharm.
Coupang’s regional expansion targets drive major growth in emerging markets
The company, however, continues to face significant competition from rivals. That includes in South Korea, where it remains a market leader. One of its strongest competitors there is Internet giant Navers, whose leading position in internet search and payments has helped it expand into online shopping.
In Taiwan, Coupang faces competition from giants Amazon, Alibaba’s Lazada, JD.com, and Shopee.
Recommendation in Pat’s Inner Circle: Coupang Inc. is okay to hold, but only for highly aggressive investors.
