Mounting losses in the South Korean e-commerce industry are calling local business models into question.
According to a new Yonhap News Agency report, competitive pricing and fast delivery capacities have made the industry an ascendant phenomenon in the territory, with the purchase of a whole spectrum of consumables now possible via mobile phone. The industry hit a record high of KRW111.8tr (US$98.4bn) in transactions last year, putting the economy among the top five e-commerce markets worldwide.
But gigantic operational losses have emerged out of stiff competition on price and logistics set-up costs. Korea’s top e-commerce firm Coupang shattered its own records with KRW4.42tr ($3.8bn) in sales last year, but made a staggering KRW1.1tr ($950m) operational loss.
While Coupang’s deficits have been widening for nine years, CEO Kim Beom-seok stubbornly insists the losses are planned and says investment will continue.