February 17, 2021
Photo: Smith Collection/Gado/Getty Images
On Feb. 12, South Korean ecommerce company Coupang released its S-1 in anticipation of an IPO on the New York Stock Exchange. The company has since raised $4.55 billion at a valuation around $60 billion, making it the largest U.S. IPO by a foreign entity since Alibaba went public in 2014.
Coupang made its trading debut on March 11. Shares jumped more than 80% on opening day, reaching $63.50 from the original price of $35. The price increase gave Coupang a market cap of over $100 billion.
Coupang was founded in 2010 by Bom Kim. Prior to founding Coupang, Kim interned at the New Republic, worked for Boston Consulting Group and launched a magazine geared toward Harvard alumni. Kim decided to drop out of Harvard Business School to start a digital commerce company in Korea. That company began as a Groupon clone but eventually pivoted into ecommerce.
Coupang has since grown into the largest ecommerce company in Korea. It operates a vast logistics network with more than 15,000 full-time drivers. Over 70% of the Korean population lives within 7 miles of a Coupang logistics center.
In some ways, Coupang's logistics make even Amazon look slow and inefficient (though, to be fair, Korea is 1% the size of the U.S.). Coupang offers free next-day delivery on items purchased before midnight. Customers leave reusable containers outside their doors, so most packages are delivered without an additional cardboard box. And customers can make returns just by leaving items outside their homes and notifying Coupang via mobile app.
Coupang has leveraged its vast ecommerce business to expand into related sectors including meal delivery, online grocery fulfillment, payment processing and digital advertising. These new business segments have largely been successful, but altogether they accounted for less than 10% of total revenue in 2020.
Coupang only serves the Korean market, which is on track to become the world's third-largest ecommerce market before the end of the year. Coupang had 14.8 million active customers at the end of 2020, suggesting it still has ample room to grow in the nation of nearly 52 million people. Notably, in the growth strategies section of its S-1, Coupang lists growth initiatives within Korea but doesn't mention the possibility of international expansion.
There's a reason investors are so eager for this IPO: Coupang's revenue nearly doubled between 2019 and 2020, now at $12 billion.
Coupang isn't yet profitable, though it has managed to lessen losses over time. In 2018, for instance, Coupang posted a net loss of $1.1 billion, while in 2020 that loss shrank to just $475 million.
Three factors stand out from Coupang's risk section: competition, operating costs and labor conflicts.
Coupang has invested so much in its logistics network that it would be difficult for a new entrant to offer comparable services. But unfortunately for Coupang, its overseas competitors have extremely deep pockets. In November 2020, Amazon purchased what could become a 30% stake in Korean ecommerce operator 11Street, which is majority-owned by SK Telecom.
Coupang is unique in the ecommerce space in that it operates an end-to-end logistics network. This strategy transformed Coupang into one of the top three private sector employers in Korea — the company's workforce doubled to 50,000 employees over the span of 2020, and it plans to double again by 2025.
And much like Amazon, Coupang has drawn scrutiny for the working conditions in its warehouses.
SoftBank owns approximately 38% of Coupang, according to The Wall Street Journal. Coupang didn't disclose the ownership stakes of its shareholders in the S-1, but Greenoaks Capital Management, Sequoia Capital and BlackRock were all early investors.