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SEOUL, South Korea – Small white delivery trucks speed through the streets all over South Korea. Uniformed workers send photos of safely delivered packages to impatient customers. Workers can move so fast, their employer promises, calling the service “rocket delivery”.
The trucks and the operation are owned by Coupang, a start-up founded by a Harvard Business School dropout that rocked shopping in South Korea, an industry long dominated by huge button-down conglomerates. In a country where people are obsessed with ‘ppalli ppalli’, or doing things quickly, Coupang has become a household name offering groceries the ‘next day’ and even ‘the same day’ and ‘dawn’ and millions of other items at no additional cost.
The company, sometimes referred to as South Korea’s Amazon, is expected to get a big endorsement from Wall Street on Thursday. Its shares are expected to start trading in an initial public offering that will raise $ 4.2 billion and value the company at around $ 60 billion, the second-highest U.S. total for an Asian company after Alibaba Group of China in 2014. On Wednesday, its actions were evaluated. at $ 35, according to a person close to the company.
Coupang may need the money. South Korea’s large conglomerates, called chaebol, and others are building their own delivery networks as Coupang plans its expansion. He also faces other issues, such as growing concerns about working conditions after the deaths of several Coupang warehouse and delivery workers that some parents and union activists blamed on overwork and poor labor practices. .
For now, Coupang is South Korea’s largest e-commerce retailer, with its status further bolstered by people trapped in their homes during the pandemic and those across the country yearning for faster delivery.
“I wouldn’t go so far as to say that I can’t live without Coupang, because there are so many other online shopping options available here that rival each other fiercely, and some of them can be as fast as Coupang or cheaper, “said Kim Su-kyeong, a Coupang customer and mother in Seoul. “But Coupang stood out so well that it’s the name that comes to mind when I think of online shopping.”
As Bom Suk Kim, who founded Coupang in 2010, likes to say, “Our mission is to create a world where customers ask, ‘How could I live without Coupang? “”
Mr. Kim, 42, ran an unofficial and pop-up Harvard alumni magazine in the United States before returning to his homeland to revolutionize his e-commerce industry. Coupang’s rapid growth has been driven by a combination of bold entrepreneurship and branding.
The name of the company is a mixture of the English word “coupon” and “pang”, the Korean sound for winning the jackpot. In an area where most delivery people drive in nondescript trucks clad in drab jackets, Coupang’s fleet of full-time drivers – known as Coupang Men, but recently renamed Coupang Friends – wear bright uniforms and sail in brand vehicles issued by the company.
“Coupang has grown rapidly by meeting the two most important needs of customers: cheap prices and fast delivery,” said Ju Yoon-hwang, professor of distribution management at Jangan University. “Coupang also has more products than its competitors, so consumers think they can find anything on Coupang.”
Only a few start-ups – like Naver, South Korea’s leading web portal and search engine, and Kakao, its leading e-mail and banking app – have been as successful as Coupang. But Naver and Kakao are both listed in South Korea. Mr Kim took Coupang to Wall Street in an attempt to woo bigger investors and higher valuation that would allow his company to outshine its rivals at home.
South Korea is one of the fastest growing e-commerce markets in the world, and is expected to become the third largest in the world this year, behind China and the United States alone. Its volume, valued at $ 128 billion last year, is expected to reach $ 206 billion by 2024, according to Euromonitor International, a market research firm.
And it’s ideal for e-commerce. About 52 million people live in the country, the vast majority of them in densely populated cities. Almost all homes have high-speed Internet access, and people pay taxes and gas bills with smartphones.
Long before the advent of e-commerce, South Korea already had a vibrant delivery culture. Families made phone calls to have their food delivered 24 hours a day. Dry cleaning workers climbed the stairs of apartment buildings to deliver freshly squeezed clothes. Couriers on motorcycles transported documents, flowers and the like from one neighborhood to another.
Coupang’s first competitors were eBay-style marketplaces where customers found sellers. Deliveries were made by third-party logistics companies who contracted with independent couriers. Deliveries can take several days.
When Coupang started its “rocket delivery” service in 2014, it sparked a price and delivery war. It has since built its own network of logistics centers, with 70% of the population now living within 11 km of a logistics center in Coupang, according to the company. The company says it uses machine learning to predict demand and store goods in warehouses. It also operates its own fleet of 15,000 full-time Coupang Friend couriers.
It also doubled its workforce to reach 50,000 in 2020, becoming South Korea’s third-largest private sector employer. It plans to create 50,000 additional jobs by 2025.
Analysts said Coupang borrowed from Amazon’s playbook seeking to become a dominant market force before turning a profit. The company’s revenue nearly doubled last year to $ 12 billion. But its massive investments in its logistics network, made possible by the financing of foreign investors like the Japanese SoftBank and its Vision Fund, have kept it in the red. Its annual net loss climbed to $ 1 billion in 2018 before declining to $ 475 million last year.
It recently launched Coupang Eats, a meal delivery service, and Coupang Play, a video streaming app. But unlike Amazon, Coupang doesn’t have other businesses, like cloud computing, that can easily generate the cash needed for large expansions. And the rivals set up fierce competition.
Some of the chaebol, the family-controlled conglomerates that dominate the economy, are expanding their e-commerce businesses, particularly Lotte and Shinsegae, which operate the country’s largest department store and shopping mall chains. The same goes for Naver, which is already an e-commerce giant.
As competition intensifies, lightning-fast delivery is quickly becoming the new normal, weakening the novelty of Coupang’s “rocket delivery” service.
Coupang has also faced a scrutiny of its work practices. Former Coupang workers and union activists accuse the company of exploiting its warehouse workers in its mad rush to process orders as quickly as possible.
As the number of workers doubled, the number of people suffering from occupational injuries or illnesses in Coupang and its warehouses rose to 982 in 2020 from 515 in 2019, according to government data.
“Coupang is an inhumane company that treats its workers like slaves or parts of a machine, squeezing them to the last drop,” said Park Mi-sook, whose son, Jang Deok-joon, has died of a heart attack last October, shortly after returning home. a night shift in a Coupang warehouse. Her death was deemed a work-related incident, and Coupang has since apologized.
Coupang has denied mistreating his workers. Last year alone, he said, it invested $ 443 million in warehouse automation and increased its warehouse workforce by 78%, to 28,400, to make its workers more efficient and effective. reduce the workload.
“What made the delivery of Coupang’s rocket possible was its massive employment and investment,” the company said in a statement.
And it continues to present itself as an essential service for busy South Koreans.
In a letter to potential investors, Mr Kim presented an example of a quintessential Coupang buyer: a working mom who, late at night, realizes she forgot to shop, then places an order. online via Coupang.
“When she opens her eyes, it’s like Christmas morning,” Kim wrote. “The order is waiting at her front door.”
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