Questions are rising as to whether a Korean online retailer will begin turning profit
In a capitalist society, a company exists to make money for its owners, or shareholders. So what if a firm intentionally makes big losses? Will its owners keep funding the money-losing outfit?
Few would expect that such a company, which gladly remains in the red, could exist in the real world. But there is indeed one – Korea’s largest e-commerce player Coupang whose loss last year amounted to nearly $1 billion.
Earlier this week, Coupang announced its 2018 performance, which showed that its annual sales stood at 4.42 trillion won ($3.9 billion), up 64.7 percent from the previous year. But its operating loss was 1.1 trillion won ($966 million), up 71.7 percent.
This means that the Seoul-based online retailer has accumulated around 3 trillion won ($2.6 billion) in total deficits since its foundation in 2013.
However, Coupang bosses including CEO Kim Bom do not seem to be overly worried about the snowballing losses. Kim, who has talked about “planned losses,” appears to care more about Coupang’s top line than its bottom one.
For example, Coupang made aggressive investments last year, doubling its logistics center to 24 across the country to enable speedier deliveries, which the entity has tried to achieve over the past few years.
Based on such proactive investments, Coupang has chalked up fast growth every year in terms of turnover. But its losses have also shot up almost in tandem, which has prompted concern among watchers.
Seemingly as easy-going as its CEO Kim is, are its shareholders, especially SoftBank Group, which channeled $1 billion into the firm in 2015 and $2 billion more late last year through the SoftBank Vision Fund.
Some observers expect that SoftBank is ready to funnel more capital into Coupang if the company needs to make additional investments, despite the losses.
It remains to be seen when, or even whether, Coupang will begin turning a profit.
Obviously, a company cannot continue to make losses indefinitely as even the most ardent shareholder will not tolerate it forever, experts point out.
Of note is that its smaller competitors like WeMakePrice and Ticket Monster are also suffering from mounting debts.
For example, the country’s first online shopping mall Ticket Monster has racked up around $700 million in accumulated operating losses since its launch in 2010.