Coupang is a fast growing, e-commerce company based out of Seoul that focuses on providing an end to end fulfillment service and same day delivery network. Their business model is a combination of direct and indirect network effects that creates a unique competitive advantage in the space.
What makes them stand out is their vertical integration of the fulfillment and delivery aspect of their business, enabling them to deliver faster than their competitors in a very efficient manner and also increase customer satisfaction significantly. Their vertically integrated logistics network consist of over 100 fulfillment centers covering over 42 million square feet of space spanning 70% of the population in Korea.
Through these fulfillment centers, they are able to anticipate and keep popular items in stock. They also utilize Machine learning and AI to predict demand spikes. This is a huge benefit as they can deploy products in fulfillment centers during peak times.
This gives them an advantage over their competition in a very cost effective manner and allows them to grow their revenue and profits exponentially. It also provides them with a large customer base that can be used as leverage when it comes to negotiations with sellers for better deals on pricing.
They are a strong player in the mobile e-commerce space and their customers are loyal to them as they can get exciting quality products at affordable prices. This translates to a high dollar retention rate and they can offer a wide variety of categories and SKUs with great customer service to their customers.
The company is also aggressive in their marketing and has a very high repeat customer base with over 50% of its users having bought on the site/app in the last 6 months. This is a very attractive business model to have and this has been the primary driving force for them to continue growing their revenues year on year in a very profitable manner and is something that investors should consider as well.
Coupang’s IPO is set for March 11th and their valuation is expected to be at $51 billion, this is a big step up from the current level as analysts have upgraded this company in recent times and expect them to outperform on average. They are also seeing some large institutional investors and hedge funds take positions in the company.
A major concern for investors is whether or not Coupang can become profitable in the near future. This is a very important issue for investors as e-commerce retailers have struggled in the past to make a profit and they must be able to expand their top line revenue at a sustainable rate to eventually generate earnings that can be shared with shareholders.
Investors should look at Coupang’s gross margin to gauge their potential for growth in this area. They are only currently at 16.0% but management is looking to raise this number over the next few years as they strive to turn a higher margin and eventually produce sustainable earnings for investors.
