Coupang Faces off against Retail Giant Shinsegae
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“We should catch up to Coupang, accepting the risk of financial loss,” said Chung Yong-Jin, vice chairman of Shinsegae Group. “Coupang is taking away our customers in their 20s and 30s. Why are we just sitting on our hands and leisurely watching the exodus?”
The JoongAng-Ilbo has recently reported that vice chairman Chung Yong-Jin of Shinsegae Group had harshly criticized Shinsegae executives for making a lukewarm response to Coupang eating into its customer base.
Chung was quoted as saying: “Even if we have to incur a deficit, the entire distribution channel should come up with strategic online product offerings and sell them at rock bottom prices to lure in 20-30 something consumers who use smartphones to make purchases. To that end, we should give priority to taking E-mart’s online mall to new heights.”
He made such a comment because E-mart, the discount store unit of Shinsegae, has lost business to social commerce operators, especially Coupang, over the past year.
After all, Shinsegae Group waged a price war against e-commerce leader Coupang last month: it announced that it would sell baby formula, feminine hygiene products and instant coffee at the lowest possible prices. E-mart, the country’s largest discount store chain logging 13 trillion won in sales and 500 billion won in operating profit, started to fight back, accepting the risk of incurring a deficit.
Coupang, established in 2010, has emerged as a threat to Shinsegae Group, the country’s largest retail juggernaut. Coupang’s sales grew sharply from 348.5 billion won in 2014 to 1.5 trillion won in 2015, greatly unnerving Shinsegae Group. If the growth of Coupang continued at such high speeds, Shinsegae Group fears, it could be overtaken by Coupang in 2-3 years.
Computer-based and mobile traffic to E-mart’s online mall is languishing in the one million visitor range. Sales from its online mall account for about 5 percent (or 700 billion won) of its total sales (13 trillion won). In contrast, the number of visitors to Coupang reached over 7 million, dwarfing traffic to E-mart’s online mall.
“If the growth of Coupang continued at such high speeds, Shinsegae Group fears, it could be overtaken by Coupang in 2-3 years.”
Coupang’s mobile app came out on top in traffic for 41 consecutive months from July 2012 to November 2015.
Though E-mart with deep pockets is trying to take sales away from Coupang by offering products at sharply discounted prices, the majority view is that Coupang still gets the upper hand on E-mart when it comes to mobile shopping. A Coupang official said: “We are unscathed by E-mart going on the offensive. Actually, things are looking up as the mobile shopping market is on the upswing. It has become obvious that so many consumers have faith in Coupang.”
According to Coupang, consumers, who have enjoyed convenient mobile shopping experiences since the launch of Coupang, will not easily drift away from Coupang.
There is no doubt that Coupang is enjoying a “first-mover” advantage as sales from its mobile shopping platform surpassed 80 percent of its total sales. According to Statistics Korea, mobile shopping sales hit 2.66 trillion won in January 2016, exceeding computer-based e-commerce sales (2.54 trillion won) for the first time.
Coupang is expanding its business realm on the back of its signature “Rocket Delivery” program, its delivery staff dubbed “Coupang men,” and its ‘direct commerce’ business model, in which Coupang takes care of all the stages of e-commerce from selling to delivery.
Coupang plans to invest 1.5 trillion to increase the number of Coupang men to 15,000 and the number of logistics centers from 14 to 21 by 2017.
Questions & Answers
Q.What is the primary reason Shinsegae Group is concerned about Coupang?
What is the primary reason Shinsegae Group is concerned about Coupang?
Shinsegae Group fears Coupang could overtake it in 2-3 years if its rapid growth continues. Coupang's sales increased significantly from 348.5 billion won in 2014 to 1.5 trillion won in 2015, greatly unnerving Shinsegae.
Q.What strategy has Shinsegae Group adopted to compete with Coupang?
What strategy has Shinsegae Group adopted to compete with Coupang?
Shinsegae is waging a price war, offering products like baby formula and instant coffee at the lowest possible prices. They aim to attract younger consumers by prioritising E-mart’s online mall and selling strategic online products, even at a financial loss.
Q.How does Coupang’s online presence compare to E-mart’s?
How does Coupang’s online presence compare to E-mart’s?
Coupang significantly dwarfs E-mart in online traffic, with over 7 million visitors compared to E-mart’s one million. Coupang’s mobile app also topped traffic for 41 consecutive months, indicating its strong mobile advantage.
Q.What distinguishes Coupang's business model from traditional e-commerce?
What distinguishes Coupang's business model from traditional e-commerce?
Coupang uses a 'direct commerce' model, managing all e-commerce stages from selling to delivery. This includes its 'Rocket Delivery' program and dedicated delivery staff, the 'Coupang men,' which are key to its service.
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