This article is part of Wellesley Hills Financial’s Market Movements series, found in our weekly newsletter
This past week marks the one-year anniversary of the World Health Organization’s declaration of a global pandemic. With the ensuing lockdowns, countless store owners were forced to close their storefronts – some for good. However, in this sense, COVID-19 presented itself as less of a paradigm shift than as an accelerant for a pre-existing trend. In fact, the beginning of the ‘retail apocalypse’ dates back to the final throes of the Great Recession. As interest rates plummeted alongside consumer spending, countless industries faced the grim reality of cost-cutting, consolidation, and storefront closures to survive. So began the slow death of brick & mortar.
Alongside the beginning-of-the-end for brick & mortar formed a now darling of the New York Stock Exchange, Coupang (a combination of the English word ‘coupon’ and ‘pang’, the Korean sound for hitting the jackpot). With its IPO last Thursday, Coupang raised $4.6 billion in the largest foreign based IPO since Alibaba first graced the exchange back in 2014. The offering was initially listed at a price of $35 per share; however, after a day of trading, shares increased by 41 percent, allowing Coupang to end the session with a market capitalization of $84.5 billion.
Coupang, the Amazon of South Korea, was formed in 2010 by Harvard drop-out Bom Kim. With the backing of institutional investors, including Softbank, Sequoia Capital, and Blackrock, Coupang has spent the past decade transforming itself to the largest e-commerce merchant on the Korean peninsula, controlling 19.2 percent of market share in 2020.
Coupang possesses a robust distribution network in South Korea, boasting 100 fulfillment centers across 30 cities. The ubiquitous nature of the Company’s infrastructure allows it to provide delivery speeds that surpass even that of Amazon. Items ordered as late as midnight are guaranteed delivery by 7am the very next morning.
On the back of the accelerated shift to eCommerce and the famed rise of Amazon and Alibaba, Coupang has been assigned a healthy valuation by the market. Given that South Korea has a population one-sixth the size of the US and a mere four percent of China, Coupang’s rise to prominence will hinge upon its ability to aggressively expand outside of its home country, while simultaneously finding a path to profitability.