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After its IPO, Coupang eyes South Korea domination

March 12, 2021, 1:29 AM UTC

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Although it’s often compared to Amazon, South Korea’s Coupang is in many ways different from the U.S.-based e-commerce giant.

For one, international expansion isn’t core to its growth strategy—at least for now.

While South Korea’s population may pale in size to that of the U.S. or China, where e-commerce titan Alibaba roosts, Coupang’s focus still remains on its home front, Coupang CEO Bom Kim said in an interview with Fortune on Thursday.

“If you look at the size of the Korea market, the commerce market is just over $540 billion just in the next three years,” Kim said when asked about any expansion outside of South Korea. “It’s a huge opportunity. We believe we were just three to four percent of the commerce market last year, which is such a small percentage. We’re just scratching at the surface.”

Investors perhaps believe the same. Kim’s comments came shortly before his company, Coupang, started trading publicly Thursday on the New York Stock Exchange, raising some $4.6 billion in what has become the largest IPO of 2021 thus far. Shares soared in their debut, closing up 40% from the IPO price, giving the business a market value of nearly $88 billion on a fully-diluted basis.

Founded by Kim 11 years ago, Coupang has turned into a massive online retailer in South Korea. It seeks to stay that way by trying to deliver ultra-convenience: The company offers same-day as well as “dawn” delivery on goods ordered before midnight the day before. Subscribers to the company’s membership program, Rocket Wow, can also return orders by leaving them at their door rather than mailing them back. And in a move to cut out the hassle of cardboard boxes, Coupang also delivers many items using reusable containers.

It’s about finding “pain points you may accept as the price you pay for online convenience, and asking, how can we break that trade off?” Kim says. “We’re just getting deeper and broader.”

South Korea’s relative wealth, heavy Internet penetration, and high-population density have made it something of a prime breeding ground for e-commerce logistics, according to Goodwater Capital. While its 52 million citizens may not compare in numbers to the U.S. or China, South Korea has the highest online shopping penetration of any nation, according to Euromonitor.

And with an in-house army of delivery workers rather than using, say, an equivalent of a FedEx, the company has sought to capitalize on the economies of scale, taking on grocery as well as food delivery more recently.

That comes as Amazon has been gradually expanding abroad. While the Jeff Bezos-founded business has also been deepening its network in the U.S., the company has also invested heavily in India and recently launched in Poland. Alibaba, meanwhile, has aggressively expanded in Southeast Asia.

Still, as Coupang seeks rapid grow, it remains unprofitable. The company posted revenue of nearly $12 billion in 2020 and a loss of nearly $475 million. And while those losses shrank 31% compared to the year before—even while revenue grew 90%—Coupang’s rivals including Internet search giant Naver aren’t resting on their laurels.

SoftBank‘s bet pays off

Coupang’s IPO also locked in sizable gains for Japanese telecom giant Softbank. In multiple investments since 2015, it has paid an aggregate of $3 billion for what is now a nearly 37% stake in the business, according to Bloomberg. As of Thursday, that stake is now worth about $28 billion.

It is the latest bright spot for SoftBank’s ambitious Vision Fund, which has recently been bolstered in recent months by the public listings of other unicorns including DoorDash and Opendoor Technologies. In February, the fund posted a record $8 billion profit in the third quarter— a dramatic turnaround from a year ago, when high-profile, and ultimately bad bets on companies such as WeWork dented investor confidence.