[Q4 2024 Results] Coupang Challenges E-commerce Market Dominance: Will Growth Continue?

Coupang announced its Q4 2024 results on the 26th (Korean time). In this fourth quarter, Coupang maintained double-digit revenue growth despite consumer spending slowdown, while also significantly improving profitability metrics.

Coupang's Q4 2024 revenue was $7.965 billion (approximately 11.4 trillion won), up 21% year-over-year. Excluding Farfetch's contribution, this represents a 14% increase year-over-year. Notably, Coupang emphasized that revenue growth was significantly reduced due to the weak dollar-won exchange rate this quarter. On a constant currency basis, Coupang's Q4 2024 revenue grew 28% (21% excluding Farfetch's contribution).

Coupang also recorded impressive results in terms of profitability. Q4 2024 operating profit was $312 million, up 140% year-over-year. Gross profit increased 48% year-over-year to $2.5 billion, and gross profit margin reached 31.3%, up 5.7% year-over-year, setting a quarterly record. Excluding Farfetch's results and insurance payments from the 2021 Deokpyeong logistics center fire, gross profit was $2.2 billion (29% growth year-over-year), with a gross profit margin of 29% (improved 3.3% year-over-year).

Revenue for Coupang's Product Commerce segment, which includes its core commerce business, reached $6.883 billion in Q4 2024, up 9% year-over-year, or 16% on a constant currency basis. The Product Commerce segment's adjusted EBITDA profit was $539 million, up 21% year-over-year, with a gross profit margin of 32.7% (31% excluding insurance benefits).

Coupang did not specifically disclose its "GMV" (Gross Merchandise Value) performance this quarter. However, based on external data, we can estimate Coupang's GMV growth rate. According to WiseApp, Coupang's estimated payment amount for 2024 was 55.0861 trillion won, up 24% year-over-year.

For reference, according to Statistics Korea, domestic online shopping transactions in 2024 totaled 242.0897 trillion won, up 5.8% compared to 2023 (22.8861 trillion won). Based on this, Coupang's e-commerce market share in 2024 is estimated at 22.8%, with a growth rate more than four times the market average.

Meanwhile, Naver, Korea's second-largest e-commerce platform, recorded an estimated GMV of approximately 50.3 trillion won in 2024 (sum of Naver's official quarterly GMV results). Considering that Naver's Q4 2024 GMV growth rate was 6.5% year-over-year, the gap between Coupang and Naver continues to widen.

A notable aspect of Coupang's Q4 results is the explosive growth of its Developing Offerings segment, which includes Coupang Eats, Play, Pay, Taiwan business, and Farfetch.

In Q4 2024, revenue from Coupang's Developing Offerings segment was $1.082 billion, up 296% year-over-year, or 308% on a constant currency basis. Excluding Farfetch, the Developing Offerings segment revenue increased 124% year-over-year, or 136% on a constant currency basis. According to Coupang, it was particularly encouraged by growth seen in "Coupang Eats" and its "Taiwan business" this quarter.

Coupang's Developing Offerings segment recorded an adjusted EBITDA loss of $118 million in Q4 2024, reducing its deficit by approximately 21% year-over-year. According to Coupang, this resulted from improved profitability in both Coupang Eats and Farfetch. In particular, Farfetch, the luxury vertical commerce platform, benefited from the Q4 high season, which includes year-end and Black Friday shopping events.

Coupang continues its "unstoppable growth" in the commerce industry, heading toward monopolistic market share. Meanwhile, market interest is now focused on Coupang's "scalability." Will Coupang's growth continue beyond its already 20-30% e-commerce market share, and can Coupang expand its territory to the "global" market based on its Taiwan business and Farfetch? We summarize the statements and strategic directions of Coupang's management around these central questions.

For now, Coupang appears to have room for growth in the domestic market and has expressed confidence in additional growth. This is because the number of active customers using Coupang continues to grow at a high rate, and their payment amounts are also increasing.

According to Coupang, the number of active customers as of Q4 2024 was 22.8 million, up about 10% from the previous year (20.8 million) and increased by 300,000 compared to the previous quarter (22.5 million). Although the exact number wasn't disclosed, Coupang stated that the number of Wow membership subscribers also grew. In Q4 2024, net revenue per active customer was $320 on a constant currency basis, up 6% year-over-year.

In response to an analyst's question about the impact of the consumption slowdown on Coupang's product transaction growth rate, CEO Bom Kim said, "While there was indeed some macroeconomic uncertainty, Coupang's growth continues to remain strong," adding, "Spending is increasing annually not only in our oldest customer segments but across all customer segments, which is the result of our continuous improvements in product selection, service, and price."

The growth factors for Coupang in Q4, as outlined by CEO Bom Kim, remained consistently the same as in previous quarters. According to Kim, Coupang's most important competitive edge is its "customer-centric" direction. He self-evaluated the current situation as simultaneously providing customers with two conflicting values: "the best shopping experience" and "the lowest prices."

At the core of enhancing the shopping experience is "logistics." In Q4, Coupang increased the proportion of same-day and dawn deliveries by 45% compared to the previous year. This reflects the effect of extending the cut-off time for same-day delivery orders by two hours.

The Rocket Delivery category has also expanded. According to Coupang, it has begun offering next-day Rocket installation services for thousands of items, including large appliances, furniture, and car tires. The fresh food category, which guarantees same-day and dawn delivery, has also expanded by more than 30%, including "fresh flowers" supplied from markets nationwide.

Coupang's fast delivery service area is expanding. According to Coupang, since last year, customers in Jeju Island can now receive products ordered on the same day by "dawn" the next day. Previously, Jeju delivery included a "ferry" process from the mainland to the island, creating physical limitations for dawn delivery service. Since early last year, Coupang has been building and expanding an MFC (Micro Fulfillment Center) in Jeju Aewol-eup that can store and ship fresh food, expanding dawn delivery services within Jeju Island.

"We expect Q1 growth rates to be similar to Q4 2024, excluding Farfetch (which benefited from the Q4 high season effect). Regardless of macroeconomic trends, our strategy remains the same: providing customers with the lowest prices and the best experience. A few years ago during the endemic period, we experienced uncertain economic trends, but I am confident that if we consistently push our strategy, we will continue to significantly outpace the market average growth rate for years to come." - Bom Kim, Coupang CEO

Logistics Automation Creating Profitability

Coupang explained that it is pursuing increased "profitability" through logistics process improvements and automation while raising service levels for customers. According to Coupang, the proportion of automated logistics infrastructure doubled over the past year, and they improved trunk transportation costs by 16% by eliminating waste elements in logistics processes.

According to CEO Bom Kim, the proportion of highly automated infrastructure in Coupang's entire logistics infrastructure is still only in the low 10% range. This indicates that higher levels of cost reduction are possible through additional process improvements.

From a profitability perspective, the role of the "fulfillment" (FLC, Fulfillment & Logistics by Coupang, Rocket Growth) business was once again emphasized. According to Coupang, FLC is growing at a rate "several times" higher than the overall Product Commerce revenue growth rate and is contributing to gross profit growth by attracting more third-party sellers.

Coupang plans to continue investing in technology and logistics infrastructure to enhance customer experience from a long-term perspective. In particular, investments in machine learning and generative AI technologies were emphasized. Technology investments are already contributing to Coupang's performance, and there are plans to expand this to search, advertising, engineering, and across the business.

"Our strategy for 2025 and beyond is simple: continue to put customers first, innovate relentlessly, and invest in big opportunities with a long-term perspective and standards. In 2025, we will expand profits through increased automation and technology utilization, supply chain optimization, and expansion of Product Commerce and Developing Offerings segments. We see opportunities to expand product selection not only for our products but also for third-party sellers through FLC, which will ultimately drive our growth. We are still in the early stages of realizing our service growth and potential." - Bom Kim, Coupang CEO

Showing Promise in Global Markets

Coupang's expansion continues in global markets as well. Even excluding Farfetch, revenue in Coupang's Developing Offerings segment grew 136% year-over-year on a constant currency basis and grew about 11% compared to the previous quarter.

According to Coupang, net revenue from the Taiwan business in Q4 2024 grew rapidly by 23% compared to the previous quarter and is operating at a considerable scale. Against this background of growth, Coupang recently launched the "Wow Membership" program in the Taiwan market.

According to Coupang, the ratio of investment to revenue has remained relatively consistent, both in Korea and in the Taiwan business. However, as the market size expands, a "leverage effect" is observed where investment costs translate into greater growth.

Improving "profitability" was emphasized for Farfetch. According to Coupang, when they acquired Farfetch in early 2024, the company was showing annual losses of hundreds of millions of dollars, with deteriorating growth. Nevertheless, as a leader in the luxury fashion industry with annual transactions of $4 billion, there were opportunities to be seen.

Following the acquisition of Farfetch, Coupang has undergone restructuring and cost efficiency processes over the past year. As a result, Farfetch's current losses have reached a "break-even" level. According to Coupang, Farfetch continues to attract 49 million visitors per month from more than 190 countries worldwide.

In this earnings announcement, there was also an analyst question about the possibility of integration between Farfetch and Coupang and potential service connection for Korean consumers. CEO Bom Kim said, "We will utilize company resources and capabilities and seek synergies if it helps," but added that "we will first finish simplifying Farfetch's operations and strengthening execution centered on customer experience."

The expected adjusted EBITDA loss from Coupang's Developing Offerings segment this year is between $650 million and $750 million. CEO Bom Kim emphasized that such investments are based on "clear customer demand" and "operational improvement possibilities." He stated that they would continue to invest based on strict criteria. If expectations are not met, they will also proceed with business restructuring based on criteria, as they have done in the past.

In summary, Coupang's confidence was evident throughout this earnings announcement. Despite the clear macroeconomic downturn, Coupang is simultaneously achieving revenue growth and profitability that belie its size as the #1 e-commerce platform. It is also proving expansion possibilities one by one in the global market, which is still in its early stages.

However, Coupang's competitors will not simply stand by and watch Coupang's rapid progress. It is necessary to pay attention to the movements of Naver Plus Store, which is about to be unveiled, and Chinese platforms that are increasing their influence in Korea these days.

As Coupang's domestic e-commerce market share is becoming saturated, it needs to prove the performance of new businesses that can leverage the existing #1 platform's user and seller network, such as advertising or data solutions, as well as pioneering global markets. This means winning over the hearts of sellers and brands who become new customers for these businesses.

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