How Does Coupang Make Money? The Coupang Business Model In A Nutshell

Coupang is a South Korean eCommerce company. Coupang makes money by selling consumer items through its desktop and mobile eCommerce platform. The company also collects various fees from its food delivery, video streaming, and advertising services.

Business Model Element	Analysis	Implications	Examples
Value Proposition	Coupang’s value proposition centers on providing customers with a convenient and efficient online shopping experience. For Customers, Coupang offers: – Fast Delivery: Guaranteed same-day or next-day delivery on many products. – Wide Selection: A vast product catalog that includes groceries, electronics, fashion, and more. – Competitive Pricing: Competitive prices and regular promotions. – User-Friendly App: An intuitive and user-friendly mobile app for shopping. Coupang aims to simplify the shopping process and save customers time and money.	Provides a convenient and efficient online shopping experience. Offers fast delivery, a wide product selection, competitive pricing, and a user-friendly mobile app. Attracts customers seeking convenience, variety, and value for their purchases.	– Fast delivery enhances customer satisfaction. – A wide product catalog caters to diverse customer needs. – Competitive pricing and promotions attract cost-conscious shoppers. – An intuitive app simplifies the shopping process.
Customer Segments	Coupang serves a diverse set of customer segments, including: 1. Individual Shoppers: Consumers looking for a wide range of products online. 2. Families: Households in need of groceries and everyday essentials. 3. Tech Enthusiasts: Customers interested in electronics and gadgets. 4. Fashionistas: Individuals seeking clothing and fashion items. 5. Small Businesses: Small enterprises sourcing supplies. Coupang tailors its offerings to cater to the unique needs of each segment.	Focuses on a diverse set of customer segments, including individual shoppers, families, tech enthusiasts, fashionistas, and small businesses. Customizes its product selection and services to meet the specific needs of each group. Provides a versatile e-commerce platform for various customer preferences.	– Diverse customer segments contribute to Coupang’s user base. – Tailoring services enhances customer satisfaction and engagement.
Distribution Strategy	Coupang’s distribution strategy relies on a comprehensive logistics network and its own fleet of delivery vehicles. It operates multiple fulfillment centers across South Korea, enabling efficient order processing and fast delivery. Additionally, Coupang uses technology, such as machine learning and data analytics, to optimize its delivery routes and inventory management. Customers can access Coupang’s platform via its website and mobile app.	Primarily relies on a comprehensive logistics network and its delivery fleet for distribution. Operates multiple fulfillment centers for efficient order processing and delivery. Utilizes technology for route optimization and inventory management. Offers access to its platform through a website and mobile app. Ensures fast and reliable delivery to customers.	– A comprehensive logistics network enables efficient order processing. – Delivery fleet ensures fast and reliable product delivery. – Technology optimization enhances distribution efficiency. – Access through a website and app provides convenience to users.
Revenue Streams	Coupang generates revenue through various streams: 1. Product Sales: Earns revenue from the sale of products on its platform. 2. Membership Fees: Charges fees for its premium subscription service, Coupang Plus, offering benefits like free and faster delivery. 3. Delivery Fees: Collects fees for certain delivery services, such as Coupang Rocket Delivery. 4. Advertising: Generates income from advertising and promotional activities on its platform. Diverse revenue streams contribute to the company’s income.	Relies on revenue streams from: 1. Product sales on its platform. 2. Membership fees from Coupang Plus subscribers. 3. Delivery fees for specific services. 4. Advertising income from promotions. Diversifies income sources through product sales, membership fees, delivery fees, and advertising.	– Product sales provide revenue from each transaction. – Membership fees enhance income from premium services. – Delivery fees contribute to revenue from certain delivery options. – Advertising income adds to the platform’s financial stability.
Marketing Strategy	Coupang’s marketing strategy involves digital marketing, promotions, and partnerships. The company utilizes digital marketing channels like online advertising, social media, and email marketing to reach potential customers. Coupang offers regular promotions, discounts, and loyalty programs to attract and retain shoppers. Partnerships with brands and retailers also enhance its product catalog and value proposition. Coupang’s marketing efforts aim to create a compelling shopping experience.	Utilizes digital marketing, promotions, and partnerships for marketing. Employs digital channels like online advertising, social media, and email marketing to reach potential customers. Offers promotions, discounts, and loyalty programs to incentivize customer engagement and retention. Forms partnerships with brands and retailers to enrich its product offerings. Creates a compelling and rewarding shopping experience for users.	– Digital marketing effectively reaches potential customers online. – Promotions and discounts stimulate customer engagement and loyalty. – Partnerships expand the product catalog and value proposition. – A compelling shopping experience enhances customer satisfaction.
Organization Structure	Coupang’s organizational structure includes teams dedicated to technology development, logistics, marketing, customer support, and partnerships. Technology development teams focus on enhancing the platform and app features. Logistics teams oversee the comprehensive fulfillment and delivery network. Marketing teams promote Coupang’s services. Customer support teams assist shoppers. Partnerships teams collaborate with brands and retailers. This structure supports innovation, user satisfaction, and ecosystem growth.	Employs specialized teams for technology development, logistics, marketing, customer support, and partnerships. Enhances platform features and user experience through technology development teams. Manages comprehensive fulfillment and delivery networks through logistics teams. Promotes services through marketing teams. Assists shoppers with inquiries and issues via customer support teams. Collaborates with brands and retailers through partnerships teams. Supports innovation, user satisfaction, and ecosystem growth.	– Specialized teams ensure a user-friendly platform with evolving features. – Logistics teams maintain efficient order processing and delivery. – Marketing teams drive user engagement and loyalty. – Customer support enhances the user experience and builds trust. – Partnerships expand the product catalog and value proposition.
Competitive Advantage	Coupang’s competitive advantage is built on its robust logistics network, fast delivery, diverse product catalog, and user-friendly platform. The company’s focus on ensuring same-day or next-day delivery for many products sets it apart in the e-commerce industry. Coupang’s efficient operations and extensive fulfillment centers contribute to its competitive pricing and reliability. Its user-friendly mobile app and regular promotions enhance the overall shopping experience.	Derives a competitive advantage from: – A robust logistics network and fast delivery. – A diverse product catalog that caters to various customer needs. – Competitive pricing and reliability due to efficient operations. – A user-friendly mobile app and regular promotions. Sets itself apart in the e-commerce industry by prioritizing convenience, variety, and value for customers.	– Fast delivery improves customer satisfaction. – A wide product catalog attracts a diverse customer base. – Competitive pricing enhances cost-effectiveness. – A user-friendly app simplifies the shopping process. – Regular promotions incentivize user engagement and loyalty.

Table of Contents

History of Coupang

Coupang is a South Korean eCommerce company founded by Bom Kim in 2010. Due to its size and market position, Coupang is often referred to as the “Amazon of South Korea”.

The company began as a Groupon-style daily deals business after Kim dropped out of Harvard Business School.

However, he quickly pivoted to an auction-based marketplace after noticing the growing influence of eCommerce.

Despite crossing $1 billion in sales just three years later, Kim was not convinced that customers loved his business.

He decided to pivot once more, this time reinventing Coupang as an end-to-end shopping platform where the full customer journey was managed from desktop to door.

This necessitated that a new logistics business be constructed to delight customers and improve South Korea’s inefficient postal service.

Coupang now delivers 99.3% of all orders within 24 hours, with customers able to receive their goods by 7 a.m. if they purchase before midnight the day before.

In recent years, Coupang has expanded into other services. Rocket Wow is a paid subscription service similar to Amazon Prime, with perks such as free or one-day delivery and discounts on certain products.

Rocket Fresh is a fresh food delivery service promising similarly rapid delivery, while the restaurant delivery service Coupang Eats and video streaming service Coupang Play are also recent additions.

In March 2021, the company held an IPO on the New York Stock Exchange which valued it at approximately $84.5 billion.

One month after entering Japan in June, Coupang launched in Taiwan where established players Uber Eats and Foodpanda are already operating.

At the time of writing, Coupang has not divulged further expansion plans. However, the company has been observed hiring for lead operations, retail, and logistics roles in Singapore.

Coupang mission

Coupang’s mission is to “create a world where customers wonder: ‘How did I ever live without Coupang?'”

Coupang revenue generation

As an eCommerce retailer, Coupang primarily makes money by selling consumer items online.

This includes the sale of third-party goods and private-label items, with the latter resulting in higher margins.

Having said that, Coupang does make money in several other ways. Let’s take a look at them in the following paragraphs.

Rocket Jikgu

Rocket Jikgu is a delivery service for South Korean citizens who want to receive overseas orders in less than three days.

The service claims to offer 80,000 items from 3,500 global brands.

Most of these brands are those not officially imported into the country and typically include vitamins, cosmetics, and detergent from the United States.

To shorten delivery times, Coupang sources products directly from the manufacturer without involving a third party.

Delivery is free if the total order amount exceeds 29,800 won, equivalent to approximately $25.

Coupang Eats

Coupang Eats is a food delivery service offering a wide range of products including meal kits, salads, meat, and ice cream.

The company charges a delivery fee of around 2,000 South Korean won ($1.70) for each order, with no minimum order amount.

Rocket Wow

As noted earlier, Rocket Wow is an Amazon Prime-like service offering fast delivery and other perks.

Here, the company charges 2,900 South Korean won ($2.50) each month after a 30-day free trial.

Coupang Play

Coupang Play is an on-demand video streaming service.

The company also charges 2,900 South Korean won per month, but Rocket Wow subscribers can access Coupang Play for free.

Advertising

Coupang also sells advertising to interested parties.

Advertising spots are based on the pay-per-click (PPC) system, so merchants are only charged when the ads are clicked on by a consumer.

Advertising is seen on almost every page of the Coupang website, allowing businesses to access their target audience across various touchpoints.

Available formats include category page listings, banners, and even order completion page ads.

How it works

To order goods online, Coupang users must visit the company website on either desktop or mobile.

The latter is the preferred method for most, with mobile applications accounting for 75% of total sales.

Margins on most third-party products are thin, a problem common to many eCommerce retailers.

To counteract these thin margins, Coupang is following the lead of Amazon by developing private-label product ranges in high-value segments such as apparel, beauty, and electronics.

In terms of order fulfillment, Coupang can deliver rapidly because it fulfills orders itself.

By operating its own distribution and logistics network, it avoids the relatively inefficient practice of sending couriers to third-party stores and restaurants.

The size and reach of this logistics network is impressive, with the company noting that 70% of its customers live within ten minutes of one of its more than 100 distribution centers.

What’s more, Coupang’s established logistics network has allowed it to expand into food delivery with relative ease.

Who owns Coupang?

Coupang is majority-owned by venture capital and private equity funds with a 54% stake. Institutions comprise 16.3%, while the general public holds 12.4%.

Individual insiders, or those that sit on the board or hold other senior management positions, have a 10.3% stake in the company.

In 2018, the company received a $2 billion investment from SoftBank Investment Advisers (UK) Limited, with the venture capital group subsequently taking a 33.1% shareholding.

Some of the other major shareholders include:

Greenoaks Capital Partners LLC (16%).
Bom Suk Kim (10%).
Maverick Holdings (6.4%).

Key takeaways:

Coupang is a South Korean eCommerce company founded by Bom Kim in 2010. The company began as a Groupon-style daily deals business after Kim dropped out of Harvard Business School.
Coupang makes money by selling consumer items through its desktop and mobile eCommerce platform. The company also collects various fees from its food delivery, video streaming, and advertising services.
Coupang can deliver orders rapidly thanks to a logistics network where no South Korean citizen is more than 10 minutes from a fulfillment center. The company is majority-owned by venture capital and private equity funds, with Softbank the largest shareholder at 33%.

Key Highlights

Foundation and Nature: Coupang, a South Korean eCommerce enterprise, was founded in 2010 by Bom Kim. It is often dubbed the “Amazon of South Korea” due to its substantial market presence. The company’s operations encompass consumer item sales through its desktop and mobile eCommerce platform.
Evolution and Market Position: Initially conceived as a daily deals business resembling Groupon, Coupang transformed into an auction-based marketplace, eventually evolving into a comprehensive end-to-end shopping platform. This shift was driven by a mission to streamline the entire customer journey, necessitating the establishment of a more efficient logistics network.
Expansive Services and IPO: Coupang extended its services beyond eCommerce, introducing offerings such as Rocket Wow, a subscription service similar to Amazon Prime, Rocket Fresh for fresh food delivery, Coupang Eats for restaurant delivery, and Coupang Play for video streaming. In March 2021, the company executed an IPO on the New York Stock Exchange, attaining a valuation of around $84.5 billion.
Mission and Vision: Coupang’s mission revolves around creating a world where customers ponder, “How did I ever live without Coupang?” This aspiration underscores its commitment to delivering unparalleled value and convenience.
Revenue Generation Strategy: Coupang’s primary revenue stream arises from selling consumer items online, encompassing both third-party and private-label goods. The company employs a diverse approach to revenue generation:
- Rocket Jikgu: Facilitating overseas orders for South Korean citizens, reducing delivery times and costs.
- Coupang Eats: A food delivery service with a wide product range, charging a delivery fee.
- Rocket Wow: A subscription service with perks like fast delivery, available at a monthly fee.
- Coupang Play: An on-demand video streaming service, also available through Rocket Wow subscription.
- Advertising: Coupang offers advertising spaces on its platform, utilizing a pay-per-click model.
Operational Strategy: Coupang effectively differentiates itself by establishing its logistics network, enabling rapid order fulfillment and delivery. Over 70% of customers reside within a ten-minute radius of one of the company’s 100+ distribution centers, facilitating both traditional and food delivery services.
Ownership Structure: Coupang’s ownership primarily involves venture capital and private equity funds, holding a 54% stake. Institutions, the general public, and individual insiders hold 16.3%, 12.4%, and 10.3% stakes, respectively. SoftBank Investment Advisers holds a significant share after a $2 billion investment in 2018.