Coupang’s billboard advertisement at Times Square in Manhattan, New York, USA. Photo coupang
Although Coupang quickly became a company with a market cap of 100 trillion won due to the listing on the US stock market, complaints from companies that have entered Coupang are increasing. In particular, it is pointed out that the appearance of the online shopping mall’Taobao’ (淘寶) of Alibaba in China is overlapping in Coupang’s progress to date. This is because the sales commission has been raised to the level of the department store, and the controversy over the sale of counterfeit products continues to be suspicious of launching its own products modeled after the products of the participating companies. Along with this, some people are even making bouts that’Coupangi logistics (full-filment) stands for Amazon, and behavior stands for Taobao’.
Sellers are also “lock-in?”…“Margin is about 35%”
The reason for comparing Coupang and Alibaba is the successive margin rate hike. Taobao, known as the “continental Amazon”, implemented a bold “zero commission” policy at the beginning of its inauguration in 2003. Opening fees, product registration fees, and transaction fees were all free. Afterwards, in 2011, it was divided into C2C (King Taobao ㆍ淘寶網) and B2C (Taobao Sangcheong ㆍ淘寶商城ㆍTmall) and started to pay B2C. In 2012, Tmall increased its annual admission fee from 6,000 yuan (1,800,000 won) to 30,000 to 60,000 yuan (5.37 million to 10.79 million won), up to 10 times. Even consumers and sellers “locked in” (locked in) and locked them in, and then started to raise the margin rate. Tmall accounts for more than 60% of the B2C market, and the C2C market is in fact Taobao’s monopoly.
Headquarters in Coupang, Songpa-gu, Seoul. News 1
Coupang also raised the margin rate for 20 domestic consumer goods companies twice in 2019 from 15-20% to 30-35%. After that, the industry estimates that the overall margin will be around 35% by making an additional 1-2% increase once or twice. This means that if a consumer buys an item worth 10,000 won, Coupang takes at least 3,500 won. It is regarded as the main secret that Coupang drastically reduced its deficit from 1,127.9 billion won in 2018 to 7205 billion won in 2019.
In February 2019, Coupang informed the company that it would only receive products with a margin of 25% or more and a margin of 2,500 won or more, and the industry complained that it stopped trading the rest of the products. In less than a month after that, the margin ratio was increased to 35%, and if the product sales price did not meet this, additional advertising expenses and sales incentives were guaranteed. They said they were asked to supply the product at a cheaper price or to pay a different marketing fee. An official from one company said, “If the company did not comply with the verbal notification, the company’s items were sequentially withdrawn or the transaction was completely stopped.”
Dispute over’fake’ sales controversy
The issue of counterfeit products sold in Coupang is also a constant controversy. The Korea Watch Industry Cooperative said last year, “There are 684 famous counterfeit watches sold through Coupang,” and demanded to stop selling them and compensate for damages. “It is estimated that the losses suffered by domestic fashion watch companies will reach billions of billions,” he said. Coupang confronted, “We are blocking counterfeit products through dedicated personnel and artificial intelligence (AI) technology,” but the controversy continues. Other luxury goods companies are also suspecting that “Coupang guarantees the lowest price by attaching a’guarantee’ (excellent seller) to some counterfeit sellers, or promotes sales by posting SNS advertisements.”
China’s Taobao lost in 2011 after a six-year lawsuit against E-Land. E-Land requested Taobao to suspend sales and freeze the account for receiving sales proceeds from China, who had sold counterfeit products of E-Land, but filed a lawsuit when he did not respond. Taobao consistently ranks on the US Trade Representative’s (USTR) list of Notorious Markets. As this problem persisted, it launched a new Tmall (B2C), where only verified companies can enter the store.
Coupang is also struggling with related associations over medicines. On the 16th, the Korean Pediatrics and Adolescents Association accused Coupang, Chairman of the Board of Directors Kim Beom-seok and Kang Seung, CEO of the Pharmaceutical Affairs Act on charges of violating the Pharmaceutical Affairs Act. The reason is that it assisted the sale of prescription drugs that can only be sold at pharmacies by receiving a doctor’s prescription. An e-commerce official said, “In the case of drugs, the name of the ingredient in question should be set as a banned word, and product registration should be blocked or follow-up monitoring, but Coupang does not seem to be actively managing it.”
“Only the rich can do business in Coupang”
“Coupang (platform) is a structure of the rich, the poor, and the poor, in which business is well done only with money,” said clothing vendor A. Unlike other open markets, where the sale price is paid in 1 to 2 days, Coupang takes about 40 days to complete the settlement. Mr. A lamented, “Because the sales proceeds cannot be received immediately, three times the sales must be returned to business funds.” In the industry, it is estimated that Coupang earns a considerable interest income with a monthly sales amount of 2 trillion won.
Among Coupang’s apparel sellers (sellers), Coupang’s entry into the clothing PB is a hot topic. It is estimated that Coupang recently intensively invested in the apparel business, increasing its sales by at least 300% last year. Mr. A said, “Coupang drove a lot of advertising costs to products while expanding the fashion business, and when the number of entrants increased, we launched PB (own brand). In the end, I think that sellers like us were bridesmaids.”
“The clothes sold by sellers are released as Coupang PB”
Coupang launched CPLB, a subsidiary dedicated to PB last year. It is a plan to grow PB products into two major businesses with Coupang Pay. In addition, there is a prospect that it is possible to expand O2O (on-offline linkage) by going offline. Taobao collected PB products in 2018 and opened offline stores in three locations: Hangzhou, Shanghai, and Wenzhou. With a separate communication system platform, sales-related information is also shared with suppliers such as designers, manufacturers, and store managers.
In connection with the case of Jang Deok-jun, who died at home after finishing late-night work at the Coupang Logistics Center in October last year, a press conference was held in front of the Coupang headquarters in Songpa-gu, Seoul in February of last year, condemning the Coupang Condemnation. The Labor Welfare Corporation’s Occupational Disease Determination Committee recognized the work-relatedness of Mr. Jang’s death and approved it as an industrial accident. yunhap news
Questions about Coupang’s logistics system are also constantly being raised. In particular, deaths of workers have occurred in the Coupang Distribution Center recently. However, Coupang has not disclosed the exact scale and operation method, even though it operates full-filment centers and delivery bases in more than 100 locations across the country. An official in the distribution industry said, “Coupang recently announced that it will create new jobs for 50,000 people, but the industry sees it as a disruptive and innovative company that creates 50,000 jobs by eliminating 100,000 existing jobs.” Seo Yong-gu, a professor of business administration at Sookmyung Women’s University, said, “To achieve sustainable growth, Coupang needs transparent management and organizational management to match its new status.” In particular, companies are promoting social responsibility by reinforcing ESG (environmental, social, governance) management. “We have to do it all.” Meanwhile, Coupang did not disclose any inquiries regarding sales commissions, counterfeit controversy, and the release of PBs in the fashion sector.
Reporter Chu In-young [email protected]
