It has been reported that total online gross merchandise volumes (GMV) for Lotte Group and Shinsegae Group, which have been the retail powerhouses in South Korea for a long time, in 2020 did not even reach half of that of Coupang. While Coupang had doubled the size of its business in 2020, major retailers’ reputation had suffered by the hands of Coupang. It is expected that competition within the e-commerce market will become even fiercer this year as Coupang is looking to go through an initial public offering (IPO) this year as it makes a quantum jump and major retailers begin to increase their investments in order to narrow the gap in market shares.
According to the industry, the GMV for Lotte Group’s online mall called Lotte ON in 2020 was $6.87 billion (7.6 trillion KRW) that is an 7.0% increase compared to 2019. The GMV for Shinsegae Group’s online mall called SSG.com was reported at $3.53 billion (3.9 trillion KRW) that is an 37% increase. Stock firms estimate that the GMV for Coupang in 2020 is somewhere between $19.9 billion (22 trillion KRW) and $21.7 billion (24 trillion KRW). Such amount doubles the total GMVs of Lotte and Shinsegae. An increase in Coupang’s GMV in 2020 from the company’s GMV in 2019 also easily surpasses the increases that Lotte and Shinsegae saw.
Normally, an e-commerce company’s value is based on GMV rather than sales. According to a paper that Coupang submitted to the U.S. Securities and Commission, Coupang’s sales in 2020 are reported at $11.9 billion that is an 90.8% increase compared to 2019. Considering the fact that the company’s sales normally come from direct purchase and that the company’s GMV in 2019 was somewhere around $15.4 billion (17 trillion KRW), it is likely that the company’s GMV in 2020 is at least 40% more than its GMV in 2019.
As Coupang had grown rapidly last year due to special demands that had occurred due to COVID-19, the gap between the company and other offline retailers within the e-commerce market had widened throughout 2020. The growth rate of Lotte ON, which was launched last year, was greatly below the market average which was 19.1% according to Statistics Korea. Considering the fact that the 7.0% increase considers online GMVs from seven departments such as department store, supermarket, and others, there was lack of synergy between the departments.
Although SSG.Com, which combines online GMVs from e-mart and Shinsegae’s online business division, was able to overachieve its goal with the 37% increase based on competitive edge in fresh goods, it failed to surpass $3.62 billion (4 trillion KRW) in GMV which was Shinsegae Group’s expectation. Because SSG.com’s morning delivery service is limited to metropolitan cities due to the capacity of distribution centers that is relatively low, it was difficult for SSG.com to compete against Coupang that covers the entire country. Based on 150 distribution centers in 30 cities, Coupang is the only online retailer that has infrastructures capable of morning and next day delivery.
Considering the fact that the growth rates of sales from Amazon and e-Bay were 38% and 19% respectively in 2020, the growth rate of Coupang’s sales is overwhelmingly great even when it is compared against global e-commerce companies. One official from the industry said that Lotte was not able to maximize synergy between departments and SSG.com was not able to follow Coupang’s growth due to lack of stock keeping unit (SKU).
It is expected that offline retailers will take aggressive measures this year in order to narrow the difference in market shares. Lotte plans to carry out aggressive marketing tactics in order to raise its GMV as quickly as possible. It plans to expand size of special promotions such as First Monday that proved to be successful last year and introduce new delivery services such as relay delivery by working with startup companies. Regarding marketing, it has decided to entrust Lotte ON’s digital marketing that had been carried out internally to an outside company.
e-Mart, which is the parent company of SSG.com, plans to invest $90.4 million (100 billion KRW) in systematic improvement and digital transformation. It also plans to drastically increase number of PP centers that utilize e-Mart’s stores as distribution centers in order to improve delivery capability. Its plan is to create synergy in its e-commerce business by strengthening collaboration between online and offline stores. Its target GMV for this year is set at $4.34 billion (4.8 trillion KRW) that is an 22% increase compared to last year.
Staff Reporter Park, Junho | email@example.com