Coupang to keep investing against Chinese players despite loss

Coupang Inc., South Korea’s No. 1 e-commerce platform facing fierce competition from Chinese rivals, dipped into the red in the first quarter, snapping its earnings growth streak over the past six quarters largely due to money-losing Farfetch Holdings Plc.

Despite the loss, the company will continue investing to improve delivery infrastructure and diversify products and services to fend off the rapid infiltration of Chinese players on its home turf, its chief said during the company’s earnings conference call on Tuesday.

Coupang announced in a regulatory filing to the US Securities and Exchange Commission (SEC) that it logged a net loss of $24 million on a consolidated basis in the January-March period, swinging to its first quarterly loss from the same quarter last year since the third quarter of 2022.

A year ago, it reported a net income of $90.9 million.

Its operating profit for the quarter also dropped 61% on-year to $40 million although it reaped $7.1 billion in total revenues, up 28% from the prior year.

The New York Stock Exchange-listed Coupang stock declined in late trading on Tuesday after its earnings missed market expectations of up to 150 billion won ($20 million) in net income for the first quarter.

The company blamed money-losing luxury e-commerce platform Farfetch for its disappointing first-quarter earnings.

FARFETCH STILL BLEEDS CASH  

Coupang took over the bleeding luxury e-commerce platform for $500 million in December last year.

It completed the Farfetch acquisition in January and reflected the latter’s earnings for February and March in its first-quarter earnings.

Coupang said Farfetch added $288 million in revenues to its business in the quarter ending March but generated net losses of $93 million.

But the company has still pinned its hopes on the luxury e-commerce platform.

Coupang CEO Bom Kim told analysts in an earnings conference call on Tuesday, “Our journey at Farfetch is just beginning and the team is focused on generating close to positive adjusted EBITDA on a run rate basis by the end of the calendar year.”

FIGHT BACK AGAINST CHINESE E-COMMERCE PLAYERS

Despite losses, it will also continue investing “billions of dollars in capex over the next several years” to improve delivery speed across the market and enable free delivery in even the remotest areas of Korea that currently do not have access to its fastest delivery options, said Kim.

Kim said Coupang will take such measures to fend off fast-ascending Chinese rivals in Korea, such as Alibaba Group Holding Ltd.’s AliExpress and PDD Holdings Inc.’s Temu.

"When purchasing at multiple retailers, customers can compare with a swipe of a finger,” Kim said. “So we have to continue to invest and innovate to provide the best experience, to win the purchase every single time.”

Since landing in Korea, the two Chinese e-commerce giants have quickly expanded their market presence with incomparably cheaper products and fast delivery.

In Korea, AliExpress and Temu added 8% and 42% monthly active users on-month in March to reach 8.87 million and 8.29 million, respectively, ranking second and third, according to mobile app analytics firm Wiseapp.Retail.Goods.

Despite their differing business models, the Chinese e-commerce giants are encroaching on Korea’s e-commerce behemoth Coupang’s lead with more than 30 million MAUs.

“We continue to focus on wowing our customers as we remain just (a) single-digit share of a massive and highly fragmented $560 billion commerce opportunity in Korea, and an even smaller share in Taiwan,” Gaurav Anand, CFO of Coupang, said in a statement.

The Korean e-commerce giant, popular for its early and one-day delivery services, posted its first-ever full-year profit in 2023.

To sustain the growth, the company is advancing into new markets.

Coupang’s active customers in the product commerce segment — shoppers who ordered from its app or website at least once during the cited period — rose to 21.5 million in the first quarter, up 16% from a year ago.

Its developing offerings segment — international operations, Coupang Eats, Play, Fintech and Farfetch — reported net revenues of $620 million in the quarter, up 337% on a reported basis from a year ago.

CEO Kim painted a bright outlook for 2024, saying that the company had a “strong start” this year.  

“Newer services like Rocket Fresh and Fulfillment & Logistics by Coupang, or FLC, are gaining momentum…. Our developing offerings are making significant strides.”

Write to Jae-Kwang Ahn at ahnjk@hankyung.com
Sookyung Seo edited this article.