What does Coupang do How does Coupang work Business Model

what is coupang

Maybe I’m missing something in the picture, maybe I should be able to draw some conclusions there that I’m just simply overlooking. But that was one of the big questions I had still lingering over my head coming out of this S-1. The business was founded in 2010 by Bom Kim, a Harvard alumnus. The company is based in Seoul, South Korea, and Seattle, the United States. Since then, Coupang has grown impressively especially during the Covid-19 pandemic when demands for online shopping peaked. Coupang, a start-up founded by a Harvard Business School dropout, helped transform e-commerce in South Korea, one of the world’s fastest-growing markets for online shopping.

  1. This means CPNG is trading at a PEG ratio below 1.0x, especially if you just look at CY2024 earnings, which are expected to grow by 64-70% depending on whether we use GAAP or non-GAAP, so CPNG looks pretty cheap in my opinion if they can hit these estimates.
  2. I’m also curious to see what they do with Farfetch and how much information they are willing to share in the earnings press release and conference call.
  3. Farfetch, with its $4 billion GMV, brings a new dimension to Coupang’s portfolio, offering the potential to capture a significant share of the untapped luxury e-commerce market.
  4. Looking ahead to 2024, I anticipate sustaining a mid-10s% compound annual growth rate.
  5. Net other revenue also includes consideration from online restaurant ordering and delivery services performed by Coupang and advertising services provided on its apps or websites.

South Koreans tend to be more receptive to ecommerce companies. This is how Coupang has become the largest initial public offering this year. By 2014, the company had quickly raised $300 million, largely from U.S. investors and in 2015 and 2018, they were able to raise $3 billion from SoftBank. The company has warehouses strategically located in such way that they claim that 70% of all Korean population are about seven miles from one of their over 100 fulfillment centers, according to the company’s S-1. To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks.

Where is Coupang headed next?

I do think CPNG can get to $2.2+ billion in net income by CY2027 but I’m also being a little conservative with my numbers because it’s hard to know what kind of revenue and margin contribution we’ll see from Farfetch and what international expansion might turn into. Sea Limited (SE) tried to expand too quickly a few years ago, and it definitely backfired; they burned a ton of cash and ultimately ended up leaving many regions they tried getting into. A passionate writer and a business enthusiast having 6 years of industry experience in a variety of industries and functions. The South-Korean eComemrce giant is now able to handle all their deliveries and is not limited to a single industry either. It also has a high rate of mobile and internet adaption with eighty percent of Koreans living in cities with internet access, and 95% of Korean buyers that own a smartphone.

what is coupang

It faces other issues, too, such as growing concerns about working conditions after the death of several Coupang warehouse and delivery workers that some relatives and labor activists blamed on overwork and poor labor practices. An easy way to think about this could be Meta’s (META) investments into the metaverse. The core business is growing very profitably, but its investments into other nascent segment is viewed by Wall Street as little more than a distraction. And if something were to come out of these investments, it would be a free option on the stock.

What is the business model of Coupang?

The number below (37.5x) is still using 2023 Q4 estimates (plus the next 3 quarters) since they have not been reported yet. If we look ahead to CY2024, CPNG is trading at 35.9x GAAP earnings with a 44% average EPS growth rate over the next few years. This means CPNG is trading at a PEG ratio below 1.0x, especially if you just look at CY2024 earnings, which are expected to grow by 64-70% depending on whether we use GAAP or non-GAAP, so CPNG looks pretty cheap in my opinion if they can hit these estimates.

what is coupang

I can see them testing new business lines over time and becoming something more than just a company that’s focused on this back and forth e-commerce with customers. But their policy is that workers do not work more than five days a week and they do not work more than 52 hours per week. They also classify all their delivery drivers as full-time employees, which gives them full benefits, so they’re not contract workers.

A look at a South Korean e-commerce business that’s set up for success.

Total spending in Korea’s retail, grocery, consumer food service, and travel was $470 billion in 2019 and is expected to increase to $534 billion in 2024. Korean shoppers will now be able to buy tens of millions of products directly from the latter platform. For example, Coupang has become such an eCommerce giant in the South Korean market because of the particularities of their customers. The company debuted with a $35 stock price and was able to get an initial $60 billion valuation, $10 billion more from what they had originally pursued. Philip Lee, a researcher of the South Korean tech world, mentions that it is thanks to the expectations Coupang has set for customers that logistics have started to change. They actually implement innovative technologies in almost everything.

Coupang has expanded its market share throughout the pandemic, nearly doubling its revenue in 2020 to $12 billion, according to company filings. I follow countless companies and select for you the most attractive investments. My Marketplace highlights a portfolio of undervalued investment opportunities https://www.forex-world.net/ – stocks with rapid growth potential, driven by top quality management, while these stocks are cheaply valued. Altogether, I estimate that looking ahead to the next twelve months, Coupang’s core segment could grow its EBITDA by 45% y/y, down from the 67% y/y run-rate it delivered in Q4.

Even though the Korean market is many times smaller than the US, it is still a significant market. South Korea is a country with just a little over 50 million citizens, 96%+ of which own a smartphone connected to high-speed internet, and a culture that highly values convenience because of very active and robust lifestyles. Coupang believes that historically, online shopping has forced customers to accept various compromises. E-commerce is convenient, but shipping times can be long and inconsistent.

From big data to logistics, all aimed at improving the buyers’ shopping experience. Coupang currently offers its Korean audience one of the most revolutionary https://www.dowjonesanalysis.com/ door-to-door services in the world, which is supported by its exclusive technology. The company is currently trying to enter the American stock market.

Personal luxury goods have seen impressive growth since the pandemic, despite China’s luxury market stall during this period. However, most industry analysts expect the Chinese luxury market to have already recovered, while Southeast Asia and South Korea have been excelling in both growth and future potential. And I don’t mention India, whose luxury market could expand by 3.5 times by 2030. In addition to these offerings, Coupang is also rapidly growing its advertising business, which offers opportunities to advertise on its websites and mobile applications, including banner advertisements, joint promotions, and other programs.

This segment is also growing 2x faster than the core business, and while it is still in a very early stage, the opportunity is massive at approximately $11+ billion per year. Nowadays, Coupang is one of the dominant forces of ecommerce in the South Korean market, in big part due to its commitment with ridiculously fast delivery speeds. Rocket Delivery is a shipping service that makes 99% of orders possible to be delivered within one day. It also utilises other innovations and algorithms that allow box-less delivery and minimal packaging.

With Coupang’s best-in-class logistics network, Korea could become the central hub for luxury goods in that region, transforming the way not only how Koreans buy lux (and they buy a lot) but also how the rest of the region buy, including China. Let’s first look at the luxury goods market, the largest segment of https://www.investorynews.com/ the overall luxury industry, which was estimated to be over $1.4 trillion globally in 2023. The latest Bain-Altagamma Luxury Goods Worldwide Market Study forecasts increased resilience to recession and continuous expansion for the rest of the decade to 2030, even amid economic turbulence and possible wars.

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