Coupang Posts Largest Operating Loss in 4 Years Amid Growing Growth Slowdown Fears

Coupang is facing two major challenges: worsening profitability and slowing growth, having recorded its largest operating deficit in approximately four years during the first quarter. Despite maintaining sales to some extent amidst negative public sentiment stemming from the 'de-Coupang' phenomenon, the company’s growth rate remained in the single digits, lower than the overall online shopping market growth, intensifying concerns about its future growth potential. The operating loss for the first quarter reached 354.5 billion won, impacted by the costs associated with responding to a personal information leak, marking the largest quarterly deficit since the fourth quarter of 2021. The company also reported a net loss of 389.7 billion won, swinging into the red.

While some evaluations suggest that the impact on profitability from one-time expenses is temporary, others argue that the slowdown in growth is the real problem. Professor Lee Jong-woo of Namseoul University, while mentioning the possibility of a return to profit in the second quarter, cited the first quarter's growth rate being lower than the overall online retail market's growth as a cause for concern. If growth potential becomes limited, Coupang could face a similar situation to Naver, potentially losing market favor due to fears of its exclusive position as a search engine being challenged and falling behind in AI competition. Coupang could face a similar predicament if it remains complacent in a business structure solely based on logistics and retail.

Professor Seo Yong-gu of Sookmyung Women's University stated that while maintaining sales despite the 'de-Coupang' incident was a commendable effort, concerns about growth limitations persist. He noted that the Korean retail market alone has clear growth limits and that securing additional revenue models such as advertising and media is urgent. Professor Seo suggested building an 'Amazon-like' model encompassing future industries like luxury e-commerce and cloud services, as well as expanding its market reach across Asia beyond Korea and Taiwan.

Regulatory risks could also be a variable. The Fair Trade Commission recently changed Coupang's beneficial owner from the corporation to Chairman Kim Beom-seok personally. This could increase legal liabilities related to regulations on profit appropriation and the designation of a controlling shareholder, thereby heightening management uncertainty. During the first-quarter earnings call, Coupang Inc. Chairman Kim Beom-seok stated that the growth rate of product commerce revenue had bottomed out in January and was showing a faster recovery. However, he added that it would take time for the fundamental growth recovery to be fully reflected in the company's financial results.