What does Stan Druckenmiller, Bill Ackman, and Softbank (weird combo, right?) all have in common? They invested into the fast-growing Coupang (CPNG), touted to be the “Amazon” of South Korea. Actually, not quite… Unlike Amazon who cleans up the e-commerce industry, Coupang has multiple focuses that include not only e-commerce, but grocery/meal delivery, and FinTech payments as well.
Business Overview
Coupang is a market leader when it comes to their various business segments in South Korea. Their top-line revenue can be broken down into the following segments:
*Rocket Delivery: E-commerce
*Rocker Wow & Dawn Delivery: Coupang’s version of Amazon Prime
*Rocket Fresh and Coupang Eats: Grocery & meal delivery
*Coupang Pay: Their more recent venture into FinTech payments (think ApplePay and AliPay)
Imagine ordering a product or groceries online and within several hours that product is dropped off at your door in re-usable packaging. Don’t like the product? Just leave it at your door and submit for your refund and Coupang will pick it back up.
Delivering millions of products.
Re-usable packaging with NO boxes (Jeff Bezos is green with envy).
Powered by 15,000 “Coupang Flex” drivers.
That is the culture of Coupang.
To accomplish all of the above Coupang invested heavily into tech and infrastructure. Management noted in their S-1 that 70% of South Korea’s population lives within a 7-mile radius of a logistics center. The company’s main focus right now is providing the “wow” factor to it’s customers and they are succeeding at doing so. Although they still remain highly unprofitable (spoiler: tech and infrastructure investments), they are growing revenues at an astonishing 90% YoY, incredible! This is mainly due to the “stickiness” of their service… I hear once you go Coupang, you don’t go back.
Growth
How are they growing so fast? Not only are they grabbing market share from their competitors (eBay Korea, 11Street, Naver Corp, Lotte), their existing customer base are spending more money more frequently in the Coupang ecosystem. Which brings me to their addressable market. They have only recently announced an international expansion into Singapore, which is the first overseas entry in Coupang’s 11 years of operation. This means they’ve mainly been operating in South Korea.
Coupang’s market share is estimated to be between 18-25% of the SK e-commerce industry and their business model portrays to have incredible stickiness leading to high retention among customers. Management noted:
“Looking at the retail, grocery, consumer foodservice, and travel spend in the Korean market was $470 billion in 2019 and expected to grow to $534 billion by 2024. The e-commerce segment of that total spend was $128 billion in 2019 and expected to grow to $206 billion by 2024, implying a CAGR of approximately 10%.”
Conclusion
Coupang definitely brings the “wow” into their business model. Doing 11 billion in sales in 2020 and growing at an incredible 90% YoY is not something to over-look. Like any business there are some risks, for Coupang those are concerns over the limitations of their current TAM and the competitiveness of existing competitors in international markets. They’ve got a brilliant management team carving the future of the company with some strong financiers to back it up. They are currently trading at a premium valuation, but that is the price of investing in a company growing as fast as they are.
Submitted May 30, 2021 at 07:26PM by TheStonksHub https://ift.tt/3uGXXU4
