By Batia Segal
With the Anti-Trust lawsuit going on against Amazon, I found myself questioning whether or not Amazon is as prominent in other countries. Being interested in the South Korean market, I questioned if Amazon is just as influential as it is in the U.S. This is where I discovered Coupang, South Korea’s largest ecommerce site. Coupang is a startup company that began in 2010 by Harvard graduate Bom Kim and is already dominating their respective market. In fact, Coupang takes 24.6 percent of the ecommerce market as of March 2020. With this information, people may assume that this is simply because Koreans naturally would support native companies because of country loyalty. Although this may be partially true, research shows that the preference is due to other factors such as convenience and Amazon’s inability to compete with the start-up.
What is Coupang?
Coupang is an online marketplace that provides fast delivery to customers for a plethora of items, ranging from electronics to groceries. Coupang is much like Amazon in the sense that it is South Korea’s largest online retailer. Their standing in South Korea is similar to Amazon’s standing in the United States. Quite like Amazon’s Prime service, Coupang’s fast delivery service “Rocket Delivery” delivers orders within one to two days with 99.6 percent of orders being delivered within 24 hours. Not only is there fast delivery, a customer can also change their mind about an item once it is already on its way. According to Forbes, a person could cancel their order once the order is on its way and change the destination of the order at the last minute. This ability is unheard of in the United States. In the United States, same day delivery service largely only exists in metropolitan areas. On the other hand, Coupang provides same day delivery for over 99.3 percent of orders according to CNBC.
Coupang’s Fast Delivery Services:
As mentioned earlier, Coupang has two main fast delivery services: Rocket Delivery and Dawn Delivery. Rocket Delivery is equivalent to Amazon Prime’s 1-2 day delivery service and Dawn Delivery is equivalent to Amazon Prime’s same day delivery service. Coupang has a competitive advantage to other Korean ecommerce companies by taking advantage of South Korea’s dense population. This is done by stationing over two hundred warehouses spanning twenty million square feet. With this in mind, CNBC reports that the company claims that 70% of Koreans live within ten minutes of a Coupang logistics center, making it possible for quicker delivery and better for customer convenience. Coupang also takes advantage of South Korea’s high speed network, allowing for a quick and seamless online shopping experience. For instance, the cut off for Dawn Delivery is midnight while Amazon’s cut off is noon. In other words, a customer can order a pair of pants on Coupang at midnight and receive it by 7:00 a.m. that morning. By taking advantage of South Korea’s dense population and high speed networks, Coupang can provide a service like Dawn Delivery, making them more efficient than Amazon.
Can Amazon ever take over the South Korean online shopping market?
For such a densely populated and interconnected country, it seems that Amazon would be quite profitable in South Korea. But this is not the case. Amazon has put off expanding to South Korea for quite a while due to their lack of resources and their disastrous failure in China. Despite this, Amazon Prime exists in South Korea but is constantly crushed by Coupang and their competitive services. Coupang drives out competition by introducing unsustainable business practices in the short term such as pouring an overwhelming amount of money into warehouses and delivery trucks. In 2019, the company reported an operating loss of 593 million dollars. They took a massive loss to drive out competition, a risk few companies are willing to take. As of June 2020, Coupang still remains unprofitable. But this is not unheard of. Amazon remained unprofitable for 14 years since their inception in 1997. All things considered, if Amazon wants to compete in the Korean market, they would have to either acquire a similar company to Coupang, Coupang itself, or they would need to pour an overwhelming amount of funds into bolstering their presence in the Korean market.
Ultimately, for Koreans, native loyalty plays quite a negligible role in favoring one company over another. In fact, Facebook is the top social media platform in the country along with their acquisition, Instagram. With this considered, Coupang dominates South Korea, not because it is a Korean company, but because of their fast delivery services and seamless online experience for customers.