🌥️ You can find out by reading this article!
- If you have been following Naver's financial results in 2023, you might remember that Naver consistently emphasized its message of ‘achieving above-market average growth in commerce.’ However, this message was absent in the Q4 2023 earnings report announced on February 2nd. For the first time in 2023, Naver's annual commerce transaction growth rate recorded significantly below twice the market average. How does Naver plan to respond to the slowdown in commerce transaction growth? We have summarized the answers from Naver's executives, including CEO Choi Soo-Yeon.
- Another concern for Naver's commerce situation is the intensifying penetration of Chinese e-commerce platforms in South Korea. Last year, the top two fastest-growing apps in Korea were Chinese e-commerce platforms, AliExpress and Temu. AliExpress even surpassed Gmarket to become the third-largest shopping app in Korea, behind Coupang and 11st. This is not just someone else's story for Naver, which lost its position as the number one transaction platform to Coupang. We listened to what Naver's executives had to say.
- In 2023, there was speculation in the industry that Naver might have given up on 'transaction' growth to focus on profitability. This is because the slowdown in Naver's transaction growth was observed to intensify each quarter in 2023. Meanwhile, Naver's revenue and profit consistently showed double-digit growth rates. In Q4, Naver's adjusted EBITDA profits recorded an all-time high. So, did Naver really give up on 'transaction' growth? Naver's answer is 'no'. Then the question is 'how'? We have summarized how Naver plans to capture both commerce revenue and transaction growth.
- In fact, Naver's strategic direction in commerce business is different. It's about strengthening its three core businesses: search, advertising, and commerce, based on 'technology' capabilities. Recently, Naver has been focusing on the utilization of 'generative AI'. We have summarized how Naver intends to use generative AI in its commerce business. With a recession expected to continue in 2024, can Naver create the turnaround they dream of?
CHAPTER 1
Widening Gap with Coupang
Naver announced its Q4 2023 financial results today. Readers who have been following CONNECTUS’ analysis of Naver’s performance might remember Naver consistently emphasized 'achieving above-market average commerce growth' each quarter. However, this message was missing in this quarter’s earnings report.
Looking at the numbers, until Q1 2023, Naver's commerce transaction growth rate was 13.7%, nearly double the 7% average growth rate of e-commerce transactions announced by the Statistics Korea. However, Naver’s commerce transaction growth rate fell sharply to 8.6% in Q2, slightly above Statistics Korea's average of 7.5%. It worsened further in Q3 to 8.2%, almost on par with the 8% average. (Detailed analysis of Naver’s commerce performance and strategic direction from Q1 to Q3 2023 can be found through the quarterly performance analysis content.)
By Q4 2023, Naver’s commerce transaction growth rate had plummeted below the market average. Naver’s reported commerce transaction volume for Q4 2023 was 12.4 trillion won. Excluding the transaction volume increase due to the acquisition of Poshmark, the growth was only 4.9% year-on-year (11% including Poshmark), which is less than half of the 10.6% growth rate of e-commerce transactions for Q4 2023 announced by Statistics Korea.
Meanwhile, the gap with Coupang, previously considered alongside Naver as the ‘duopoly’ of domestic e-commerce platforms, is widening. According to recent data released by WiseApp, Coupang’s estimated payment amount for December 2023 was 4.275 trillion won, a 22.8% increase year-on-year. This analysis indicates that the gap between Naver and Coupang is widening.
Therefore, during this quarter’s earnings announcement, analysts questioned Naver's management about the slowdown in commerce transaction growth and strategies for this year.
