Coupang is a Korean e-commerce unicorn. Now the legacy retail giants take action to kill the unicorn.
Korean biggest retailer e-mart declared war for the lowest-price for diapers and baby formula, directly targeting Coupang.
Starting as one of the hundreds of local flash deal companies on 2010, and now being backed by 1 billion dollar investment from Softbank, Coupang has been disrupting Korean e-commerce and retail market.
Standing out of harsh competition among major Korean ‘social commerce’ companies, it emerged as the leader of mobile commerce as the smartphone penetration skyrocketed. It transformed itself quickly from a Groupon-like social commerce to an amazon-like mobile commerce.
Coupang focused strategically on diapers and few everyday commodities with the lowest price and ‘Rocket Delivery’ (one-day delivery service for selected items) to earn enthusiastic customer base among young mothers. Young baby caring ‘moms’ who have no time to go shopping or even turn on a PC for online shopping were the target customers for Coupang. The moms turned to smartphones on their hands and logged in Coupang app to order diapers delivered to the doors of their home.
Diapers were once the most sold item in e-mart. Now they buy diapers from Coupang. Last year, diaper revenue of e-mart plummeted 26%, while Coupang became the No. 1 destination in your mind for buying diapers. .
It is just one of many indicators that major retailers are left behind the e-commerce players.
So called ‘mart’ (Korean equivalent to Wal-Mart or Tesco) including e-mart, Homeplus and Lotte Mart was the place you go shop for everyday commodities and occupied largest portion for a domestic retail market.
Their revenue ceased to grow while e-commerce still outpaced traditional retailers. According to Statistics Korea, the amount of money spent for online shopping was bigger than that of marts last year for the first time.
So the legacy retail giants began to feel threatened now. President Shin of Lotte, a conglomerates whose business spans from a department store and mart to CVS and TV home shopping to sweets and beverages, urged his executives to innovate “like coupang.”
And it took another bold action. It began ‘SSG delivery’, its own one-day delivery service. You can get your product the day you order if only you ordered it before 3 pm. For this, e-mart opened its second online commerce-dedicated distribution center at Gimpo, near Seoul.
You can see it aims for Coupang’s Rocket Delivery.
So, e-mart is competing Coupang in two areas where Coupang is dominating – lowest price for flagship products young moms care and delivery.
Who will win?
Coupang preempted market with convenient mobile experiences and Rocket Delivery. It played better at online commerce compared to legacy retailers.
e-mart has deeper pocket. It has more resources and stronger brand power. It just began to step into online commerce, so it’s hard to expect the potential of giant.
Once e-mart opened the new era of retail by introducing the Western style retailers. Now Coupang is about to put mobile commerce into a mainstream consumer market, which is the last thing e-mart wants to see. So that’s why the war begins.