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Coupang shares look like a bargain – should you buy “South Korea's Amazon”?
Regulatory uncertainty and data breaches have overshadowed Coupang, a sophisticated e-commerce firm. Is it time to buy in?
Coupang (NYSE: CPNG) was founded by South Korean-born, US-raised entrepreneur Bom Kim. Having experienced America's customer-focused retail culture, he believed South Korea's dense cities and digitally connected population made it an ideal market for a modern logistics network.
South Korea may be a technological powerhouse, yet for a long time its retail sector lagged behind. The blame lay with the chaebols, the family-controlled conglomerates such as Hyundai that emerged after the Korean War and came to dominate the economy. Protected from foreign competition for years, they faced little pressure to improve service or convenience. That left a gap for Coupang.
Kim initially founded a Groupon-style business in 2010, but in 2012 he abandoned the online-coupon model in favour of logistics. The company began building warehouses and acquiring its own delivery fleet. At the time, venture-capital investors preferred asset-light software companies to capital-intensive infrastructure projects, leaving Kim struggling to secure funding.
The strategy required immense scale to become viable, resulting in years of heavy losses. Rather than relying on third-party couriers, Coupang adopted a direct-inventory model. It buys inventory outright and stores it within its own network. To make this work, Coupang developed proprietary software to predict localised demand, positioning inventory close to consumers before orders had even been placed. That reduced delivery times, improved efficiency and made rapid delivery economical in densely populated cities.
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For the first few years, Coupang burned through cash and at times looked as though it might not survive. But in 2015, the investment firm SoftBank invested $1 billion, giving it the breathing space to keep operating for several years despite its mounting losses. The funding allowed Coupang to continue building fulfilment centres and refining its software. SoftBank's investment encouraged further backers before Coupang listed in New York in 2021. By then, the logistics network had reached sufficient scale for revenues to outgrow costs. Annual losses became progressively more manageable before the business turned profitable in 2023. This demonstrated that an automated infrastructure platform could generate attractive returns once the investment phase was complete.
Coupang now has more than 100 fulfilment facilities supported by proprietary software. Management has shifted its focus from building the network to increasing its utilisation by layering new services on top of the existing infrastructure. With the warehouses, software and delivery fleet already in place, additional transactions carry relatively little incremental cost. Every extra order offers the potential for higher profitability.
The first major extension was the WOW membership programme. Similar to Amazon Prime, it offers unlimited deliveries and free returns for a modest monthly fee. Members also receive Coupang Play, including live sport. The combination encourages customers to concentrate a greater share of their spending on the Coupang app, strengthening loyalty and encouraging repeat purchases.
Other expansions include Coupang Eats, launched in 2019, using the group's logistics for restaurant delivery. Fulfilment and Logistics by Coupang, introduced in 2022, allows third-party merchants to use the company's distribution network. Rather than simply selling goods, Coupang increasingly earns service revenues from businesses that depend on its infrastructure. In 2024 it acquired luxury marketplace Farfetch. The deal gives Coupang access to affluent consumers and the high-margin luxury segment, while extending its reach beyond South Korea and its core mass-market retail business.
Coupang faces headwinds – can it bounce back?
Building infrastructure on this scale also creates vulnerabilities. When millions of households depend on a single platform, failures can become costly. In 2021, a fire destroyed Coupang's Deokpyeong fulfilment centre, wiping out 16 million items. Regulatory problems have also emerged. In 2024, the Korea Fair Trade Commission imposed a 162.8 billion won (£92.4 million) fine after finding Coupang had manipulated search algorithms to favour its private-label products over third-party merchants.
The most damaging blow came in 2025 with South Korea's largest data breaches. A former employee gained unauthorised access to personal data affecting more than 33 million customers. The incident prompted management changes and a 1.7 trillion won (£1.2 billion) customer-compensation programme through platform credits and vouchers, rather than cash payments. In June, regulators imposed fines totalling £300 million over the breach and separate data-handling violations. The penalties were lower than feared.
The fallout extends beyond cybersecurity. In April, South Korea designated Bom Kim as Coupang's controlling shareholder, potentially subjecting it to stricter rules applied to conglomerates such as Samsung. The financial impact is now evident. Second-quarter sales rose 4%, but the firm fell to a loss of $160 million even excluding fines. Its shares have lost more than 60% since last year's highs. Political tension and weaker profitability have overshadowed a sophisticated e-commerce business. Coupang trades on an enterprise value-to-sales ratio of just 0.7, reflecting legitimate concerns over corporate governance, regulatory uncertainty and profitability, but placing little value on a logistics network that would be extremely difficult to replicate. If management can restore trust and recover margins, today's valuation could prove unduly pessimistic.
(Image credit: Future)
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