Coupang’s Surging Performance Highlights Crisis in Offline Distribution Industry

**Coupang Thrives as Online Shopping Soars while Offline Distribution Industry Faces Crisis**

By Park Hong-gu

The popularity of online shopping continues to surge, reflected in Coupang’s impressive performance. In contrast, the offline distribution industry is grappling with a deepening sense of crisis. E-Mart, in an attempt to compete with Coupang’s quick delivery services, launched a membership program that integrated online and offline services last June. This ambitious measure offered various benefits such as discounts, cashback, and accrued rewards for an annual fee of only 30,000 won. However, E-Mart’s second-quarter performance failed to meet expectations. Sales only increased by a meager 1.7% compared to the same period last year. Additionally, the operating loss intensified from 40.7 billion to 53 billion won.

Meanwhile, Coupang achieved its highest-ever performance in the second quarter, boasting sales of 7.7 trillion won and an operating profit of 194 billion won. This strong performance marks a continued surplus that began in the third quarter of the previous year. Analysts attribute this success to the growing popularity of online shopping as a prevailing trend during the COVID-19 era. Professor Lee Eun-hee from Inha University’s Department of Consumer Studies explains that once consumer behavioral patterns are established, they are not easily changed. She highlights that the two-year duration of the pandemic created ample time to address various issues associated with online shopping, ultimately bolstering its appeal to consumers.

E-Mart, faced with mounting concerns, made efforts to revive the company by providing its members with E-Mart gift certificates. Prior to this, the management team underwent executive reorganization, and the CEOs of E-mart and Shinsegae Department Store were dismissed. The introduction of experiential stores aimed at attracting customers and the anticipated effects of an integrated membership program are expected to improve E-Mart’s performance. However, skeptics question whether this response adequately addresses the current market situation. Kim Suk-kyung, a senior research fellow at the Korea Institute for Industrial Economics and Trade, views this strategy as centered around stabilizing profitability. While it may yield short-term improvements, there are inherent limitations.

Industry experts predict a fundamental shift towards an online-centric distribution market, potentially widening the gap between online and offline companies even further. To avoid a more severe crisis, offline companies must develop an IT strategy with a digital focus. Failure to adapt in this ever-evolving landscape may have dire consequences.

This is Park Hong-gu reporting for YTN.

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[앵커]

As the number of users using online shopping increases, Coupang’s performance shows an upward curve.

On the other hand, the sense of crisis in the offline distribution industry is growing.

Reporter Park Hong-gu reports.

[기자]

E-Mart launched a membership that integrates online and offline services last June to counter Coupang’s rocket delivery.

It was an ambitious measure that provided discounts and accrued benefits as well as cashback by paying an annual fee of just 30,000 won.

However, E-Mart’s later announced second quarter performance fell short of expectations.

Compared to the same period last year, sales increased by only 1.7%, and the operating loss increased from 40.7 billion to 53 billion won.

On the other hand, Coupang posted its highest performance in the second quarter with sales of KRW 7.7 trillion and operating profit of KRW 194 billion, continuing the surplus that started in the third quarter of last year.

There was an analysis that online shopping has become popular and has become a trend during the period of COVID-19.

[이은희 / 인하대 소비자학과 교수 : 소비자가 일단 행동 패턴이 형성되면 잘 안 바꿔요. 코로나 2년의 기간은 굉장히 길다. 그 기간 동안 온라인 쇼핑으로 이뤄질 수 있는 여러 가지 문제점, 이런 것들이 다 보완이 돼서….]

E-Mart’s sense of crisis has increased.

The union tried to revive the company by giving its members E-Mart gift certificates, before which management conducted a regular executive reorganization and fired the CEOs of E-mart and Shinsegae Department Store.

E-Mart’s performance is expected to improve as it introduces experiential stores to attract customers and the effects of integrated membership become apparent.

However, there are many skeptical views as to whether this is an appropriate response to the current market situation.

[김숙경 / 산업연구원 선임연구위원 : 수익성 중심의 안정화 전략으로 가는 거라고 저는 보는데요. 그러면 단기적으로 뭔가 수익성 개선에 도움이 될 수는 있을 것 같아요./ (하지만) 이런 전략은 한계가 있겠죠.]

Experts predicted that the distribution market would eventually shift to an online focus, and that the gap with offline companies could widen further.

This means that if offline companies do not develop a digital-centric IT strategy, a bigger crisis could occur.

This is Park Hong-gu from YTN.

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