E-commerce operators keep splurging despite snowballing deficits
In the classic game of chicken, two cars drive straight to each other. As the loss of swerving is trivial compared to the crash if nobody swerves, the rational option is to swerve immediately.
Knowing this, however, any player does not swerve because they believe the other player will eventually swerve. And the result is the crash, which demolishes both sides.
That might be the case for Korea’s e-commerce market where operators continue to splurge despite huge deficits.
Business bellwether Coupang vows to keep shelling out big bucks to streamline its delivery system in spite of accumulating losses over the past few years.
For example, the Seoul-based company’s loss amounted to nearly $1 billion last year, up more than 70 percent from a year ago. Its overall losses since its foundation in 2013 stand at more than $2.5 billion.
However, Coupang leaders including CEO Kim Bum downplay them as “planned losses,” while vowing to invest more to remain ahead of the pack.
Small-sized rivals of WeMakePrice and Ticket Monster also suffer from mounting debts.
For one, Korea’s first online shopping mall Ticket Monster has racked up around $700 million in accumulated operating losses since its launch in 2010.
However, they are as aggressive as Coupang.
WeMakePrice recently came up with a marketing campaign of promising to offer funds to its customers in case its products are expensive than those of Coupang.
In the case of Ticket Monster, the company delivers its products free of charge on the eighth day of every month.
Observers point out that such marketing gimmicks would surely help the two companies raise their top lines, but only at the cost of their bottom lines.
Money-losing companies cannot stay afloat forever. Now it’s time to see who will swerve first.