Specialist
Former C-level executive at Coupang
Agenda
- Potential election and national audit impacts on Korean e-commerce players, focusing on labour practices and search algorithms
- Competitive positioning and GMV mix expectations for Coupang (NYSE: CPNG) across verticals such as beauty and personal care, fashion and fresh groceries
- Market share dynamics and competitive moats in the Korean e-commerce market 4. Rival strategic alliances and their potential implications for Coupang – Shinsegae (KRX: 004170)- Naver (KRX: 035420) share swap and Amazon (NASDAQ: AMZN)-11Street (KRX: 034730) partnership
Questions
1.
What could be the implications of the national audits and upcoming elections for e-commerce players in South Korea, building on our previous discussion of Coupang [see Coupang – Monetisation Opportunities & APAC Expansion Strategies – 7 September 2021]?
2.
Has it been typical to attack large companies, even outside of tech, to win votes during previous elections? Has this dynamic always been hovering in the background of the Korean e-commerce industry, it’s just that Coupang is being scrutinised more this time given it’s listed?
3.
Could limited scale or costs from over-regulation damage the profitability of Korean e-commerce players such as Coupang in the mid-to-long term? Is this scenario possible or unlikely?
4.
How could labour practices develop for Coupang and other players? You said it’s difficult to predict where regulatory pressure could concentrate, but labour has been emphasised by tech companies in general and by Coupang in its earnings calls. Is the government striving for a particular ideal or scenario? Is it benchmarking e-commerce players against other industries? What lacking aspects of labour practices in e-commerce does the government want players to catch up on?
5.
Is any e-commerce player doing particularly well with labour practices? I understand that several companies are still using part-time drivers, warehouse staff and third-party logistics. Is there an industry benchmark that the Korean government may judge acceptable or are all players along the same lines?
6.
Could a full-employment-only labour force dramatically change Coupang’s cost profile?
7.
Have e-commerce players besides Coupang previously faced allegations around search algorithms? Are there examples we can take reference from?
8.
Would you say the search algorithm allegations have deterred merchants or third-party sellers from joining Coupang?
9.
How would the GMV mix differ between the first- and third-party models under Coupang?
10.
What is Coupang’s beauty and personal care strategy? Is it approaching international brands to establish official stores on the platform, or buying inventory from them? Is it focusing more on official C2C sellers through the third-party model to expand the category?
11.
The fresh category will be a strategic priority for Coupang over at least the next 1-2 years, and I know the company has been very strong in FMCG for a long time already. Are there any categories besides fresh where Coupang may be allocating more resources?
12.
Could Coupang attract more third-party sellers than Naver to win in the high-margin fashion and accessories category? Is it unlikely that Coupang would dedicate the resources needed to win given what each platform started with and how their strategic priorities have aligned over the years?
13.
How important could fresh or grocery and food delivery generally be to the Rocket Wow membership flywheel? What role do these adjacencies play in complementing the core e-commerce offering?
14.
Vertical marketplaces in the US or India – especially in segments such as fashion, mum and baby and electronics – may become category winners, even if they don’t drive the most traffic overall. Could this become a scenario for Coupang? Are the horizontal e-commerce platforms in Korea aggressive enough that there isn’t much room for vertical players?
15.
Coupang took around 14% market share by GMV in Korea in 2020, which is double the 2018 market share. Is this increase due to the platform taking share from smaller e-commerce players such as 11Street and Gmarket? Is this increase proportional to the speed at which e-commerce penetration grew in Korea?
16.
Could Coupang’s logistics capabilities and associated customer experience be the crux of its long-term competitive positioning? Is it possible for other players to catch up without having to roll out a fully self owned logistics fleet model? Can a mix of third-party logistics match the customer experience Coupang provides?
17.
As you said, Naver has complete market leadership in the Korean market. Are Naver Shopping and Naver Search operated completely separately, or could the relationship between these businesses have any implications for Coupang’s relationship with Naver Search?
18.
Naver has completed its share swap with SSG and E-Mart, and they mentioned they will be sharing resources across the fresh and luxury fashion categories. How much of an implication could this have for Coupang? Could it be unaffected given it isn’t aiming to corner luxury goods? Could the share swap and strategic alliance lead to Naver taking share from vertical fashion marketplaces rather than Coupang?
19.
Why has 11Street been losing market share since 2016 while still deciding to focus on profitability? Was there a key inflection point in 2016?
20.
Could there be substantial implications to the 11Street-Amazon partnership?
21.
Would you say that social commerce emerged to replace eBay in Korea, as is the general thought? Could social commerce impact third-party-driven platforms more significantly over the next 3-5 years?
22.
Could Coupang perceive Kakao as a competitive threat given it charges zero commission? Could existing e commerce giants in Korea need to lower commission rates in response to this?
23.
Would you say it’s difficult to build customer loyalty in Korea given the multitude of third-party-driven platforms with high inventory or seller portfolio overlap? Is this challenging if wide selection is the only thing they’re providing?
24.
Does anything else factor into your margin outlook as Coupang scales? What revenue or category mix do you think would be ideal to eventually strike profitability, or mix across delivery, grocery, e-commerce or country? Is there anything we’ve missed in our two Interviews?
