Bom Suk Kim, Founder and CEO, Coupang
In conversation with: Lucinda Shen, Writer, FORTUNE; Editor, Term Sheet

Fortune Global Forum 2021: Innovating e-commerce - A view from Korea

Conferences

Hi everybody. Um So we have Bomb kim, who is the ceo of kupang kupang just went public earlier this year on the in the U. S. And the company is now valued at a massive $70 billion. And just to give an idea of just how insane that is. The company just over the pandemic was actually Only value at 10 billion. Um and so the easiest way to understand the company is actually probably as the amazon of south Korea, that is how a lot of media has described it. But in reality the company has had to make a lot of specific tailoring of its tech so that it fits for the south korean market. So Bomb, thank you for being with us today. I would love for you to start off with kind of talking about what the reality is for coupon to kupang and how you have had to set up the company and a specific tech for the market in South Korea. Yeah, I think the best way to really understand the company, how it's evolved and how it will continue to evolve is to understand our mission statement. Um we have a unique mission statement that drives everything we do. It's to create a world where customers wonder, how did I ever live without Koopa. And what we mean by that is that we want to create exponentially better. Not not incrementally better, but exponentially better customer experiences. Because customers don't say that, wow, how did I ever live without this? Unless it's something that breaks a fundamental trade off. Anyone can create a battery that lasts longer, but it's heavier. But if you can break that trade off and create a battery that lasts twice as long, but that weighs half, you know, that's half as heavy that, you know, and when you accumulate those types of experiences, customers wonder, you know, how did I ever live without this? And I think the mission statement, we created that mission statement. You can't tell what industry we're in, what category we're in looking at the mission statement because we were driven, we are driven first. Uh, first and foremost, not by the desire to create a successful company business, but really to to create these transformative experiences that lead to successful businesses. Uh, and and if you look back at our history, you know, that we we didn't start in the version that we are today. We you know that that really that's kind of second founding happened about six years ago and I think you're alluding to that. Um, Yeah, and you know, we didn't have gone delivery for example, six years ago. Yeah, you didn't have gone delivery, which it's the audience doesn't know, is basically if consumer wants to go to you and well, how about I let you describe delivery. Yeah, I mean again, look, let me frame it a trade off that we broke. So we started looking at what's a typical trade off. You see an e commerce one of the classic trade offs, selection and speed. So if you want delivery within hours, I think you, you know, in new york, you know, you probably have delivery within hours, but you see selection shrink usually to that of a convenience story. If you want it within hours. We wanted to, we we wanted to work backwards from, you know, this experience of getting millions of items delivered to you within hours. That's what customers want. They don't want to trade off between selections and, and speed. So today I'm don delivery, you can order, you know, millions of items, everything from electronics to groceries, you can get watermelon and ice cream and your chicken as well as your, you know, uh, laptop or ipads or ballet tutu's order it right before you go to bed, you know, as late as midnight And before seven. a.m. It's waiting for you on our don delivery. She was waiting for you in front of your door, like Christmas morning. That's, you know, that's what, what, what we've, we've worked backwards from this experience to make it to make it a reality, right? So effectively, hopefully consumers will never have to leave their home again. And we were talking about this earlier, actually, behind the scene, kupang did not start out as kind of an e commerce amazon esque model. It actually began more as a group on which, if we all remember from back in the day actually was Harvard textbook business school example of a company that grew incredibly, incredibly fast. um, but then ultimately kind of really fell short of investor expectations. And so at what point in your company's history did you realize that the Group on model wasn't going to work for what you were trying to do? Yeah, I think, you know, if you look at where we really began as a three D marketplace, a Groupon was a few months, you know, we started as as, uh, but it became a three p marketplace. And that's what we were for the first 3 to 4 years of the company's history. And there's this moment where, you know, about six plus years ago whereby, you know, every conventional metric, we were a successful business. You know, we were profitable, growing very, very fast. Uh, scale was approaching nearly a billion dollars in sales. We were actually, we're getting pitched to take the company public and we're in the process of doing so and probably the most important moment. I think the moment where our mission statement became not just something that we said, but something that that became ingrained, you know, as part of our DNA is when we looked in the mirror and said, look, we may have a successful business, but do we have the company that we set out to build? You know, are we living up to that mission statement? And the reality was no, because we hadn't broken any hard tradeoffs for customers. The experience was just incrementally better at best. Uh, so, uh, so we, you know, we couldn't create that don delivery experience or you know, a returns experience. I don't know lieutenant. Do you know how our returns work? I don't know if I, if, yeah, that's another class of trade off in e commerce. Right? When you deliver, you can get things so easily with the tap of a finger. But it's a real pain to return something when you make a mistake online on our on our network. Um you know, if you order something and it's not what you wanted, let's say you ordered a pair of shoes and it doesn't fit you. You know, you can leave it outside your door, no label to reprint it, no extra packaging. Just leave it outside your door, tap on your phone, a simple tap on your phone. We come and pick it up. Uh And and and uh you know, and the moment we scattered in front of your door, uh you know, you're the refund initiates immediately. That's the kind of thing we're able to build because at that moment, six years ago we decided to deliver that kind of experience. To break that kind of trade off, we needed to not only build a fulfillment network, but our own last mile delivery network and the technology to integrate at all. And that is, you know, to, to start off from, from day one in that kind of full integration and to build a technology that integrated everything from the start. Um you know, we hadn't seen that before and it was a big decision, ended up taking billions of dollars years of very, very hard work on the part of our teams, but you know, we're here today, you know, a long ways from where you just said, we started because of that. Yeah, so i it's really funny when you think back on a time when kupang was really kind of evolving activating from the group on model, it was around the time Amazon was actually not a very obvious company at the time, E commerce wasn't super obvious at the time. Um, just as a statistic for those who are listening Uh, for the 1st 20 years of its life, Amazon had made just 20 billions of profits and so that it wasn't a super attractive business from a fundamental perspective, I had actually heard a story um, from an investor about you bomb that you had actually fought one of your investors. You had fought to really convince them back in the day that the idea, the best idea was to invest and create an end to end marketplace like that of amazon to invest and create an entire logistics system. Because south Korea the time, they don't have a USPS ups, um, do not have the Fedex shipping system. It was going to cost a lot of money, but you believe that that was going to be more effective than Ebay. and so can you tell us that story and why you were. So this is going to work. It was actually more than that because I think at the time amazon had a fulfillment has built a fulfillment network, but it was still plugging into the existing last mile delivery infrastructure in the U. S. As you mentioned, there's just like we would plug into a credit card infrastructure. We wouldn't want to rebuild the credit card infrastructure. So I think there's a lot of initial pushback to say, hey, why do you need to build that? Why not plug in to existing infrastructure and create the best experience that you can within those confines within those constraints. That's just not how, how we operate. And I think that's that orientation I think is what is different about us. We don't think of ourselves as, you know, there's some companies that define themselves, the company makes great cars or create great shoes. The way we define ourselves is we want to create moments of, wow, you know, we actually have a saying, we aim for unrealistic experiences because if it's a realistic experience, chances are it's not new and it doesn't really break a meaningful trade off. So how if you're in the business of creating unrealistic experiences, then you have to work backwards from that and say, what are the things I have to rethink to make that possible, because it's unrealistic because it's usually hard to do within the existing infrastructure, within the existing constraints. And so I think that was just another example of people saying, look, if you want to build, you know, x business model or something like another company, why just do exactly what they do? Well then that's not that's not going to create an unrealistic experience. You're not gonna get delivery within hours and millions of selection, you know, available to you. You can provide convenience store level selection and delivery with ours. Or you can have the convenience of ordering, but the inconvenience of returning. But if you want to break these trade offs, I think we have to rethink the fundamental constraints. And and that was the first moment where, you know, I was trying to tell them, we're not trying to be a certain company, We're not trying to build a certain business model. We're really just trying to create another moment, you know, an exciting moment of wow for our customers. Um, so when you want to kill that investor was No, no. I mean, I think that this is the general skepticism. That's natural, right? Most most people are natural of of of new investment. First of all, I mean there it's natural to, to investment is by definition risky. Uh, and new is by definition risky. So I don't think it's, I don't, I think it's it's healthy to have some skepticism. Um, and I think our, our investors thankfully now have seen that we are, you know, our core competency is not about, it's not even about e commerce, it's really about building. You know, we were a profitable marketplace that had no business launching an end to and fulfillment network to launch rockets. And when we launched rocket, you know, we wanted to do dawn delivery rocket wild on and same day delivery. You know, after that we want to do fresh cold chain nationwide, which again, every single, you know, and then we wanted to do food delivery, hot food delivery, all of those steps. I think at every step investors couldn't did and could. And in some we should ask ourselves, ask us what what what competency do you have that makes you believe you could succeed in that next face. So that's a great point. A question that we have from the audience, which is what the pandemic e commerce trends you think are going to outlast this year. Yeah. Again, if you think back from the customer perspective, you know, something like, uh think about the experiences you miss, uh, you know about about pre pandemic days, if you miss it, you probably will go back to it. If you don't miss it, you probably won't go back to it. So for example, with e commerce, generally speaking, there may be have been a lot of people who discovered how convenient, you know, our rocket delivery and don delivery was. I just described you don delivery, you order before midnight, you know you wake up and it's just waiting for you and by the way when you go to bed it's like when you go under for surgery, even though you know a few hours have passed. It feels like only minutes has passed because you close your eyes, you open your eyes and boom, it's it's you know, it's a little cheesy but it feels magical. Are you going to miss going back out and making, taking time out of your weekend um to make a trip somewhere to do that to replace that? If you do, you'll probably go back to if you won't um you know you you won't you won't go back to it. You know for example restaurants, I love eating at restaurants. I miss it. You know, I missed it. So am I going to spend you know spend more time eating at a restaurant after the pandemic end? Absolutely. But I don't miss, you know, flipping over town, you know, doing a bunch of other things that I won't go back to it. I've now just you know, I may be a customer that I've now discovered how easy it is and how there isn't a trade off when you, when you order. Um you know, a lot of things that that I may have assumed or trade offs when I ordered to my home may not be a trade off. And when you discover that, you know, I I think those are the beginnings of more secular changes in customer behavior so bomb you lot. You're very passionate about your mission, which is to make consumers wonder, what the heck have I been doing all this time without pooping? And it gives you, like you said earlier, very broad mandate to expand. And so I wonder what is the next Moonshot that, that isn't for you. Um, and we only have a few seconds remaining. So we don't, I don't believe in Moonshot bets. I really think if you look at our investments, you know, and by the way, I think of all our investments on this quarter quarter basis investments at the early stages don't take a lot of capital in the initial stages. We're just learning as we track all of them very closely and as they prove themselves out as we get more and more confident about their future casual generation and their potential to while the customer, that's when real capital is invested. So if you look at any kind of 1 to 2 year timeframe for, for any of our investments, you know, it looks, uh, we're investing, but in a 567 year timeframe, they're generating meaningful cash flows. And so, you know, I don't believe in kind of moonshots go all and go big or go home. It really is about a portfolio of investments and you increase investments as you get, you know, certainty about his future potential. Uh, actually, it's why I think some investors get upset when companies make more investments are our smartest investors. So the smartest investors, I know, uh, no, that the moment when we're making the, making more investment is when they get, we should get most excited because that means we have something, some opportunity. We feel the strong, you know, really strongly about. Unfortunately we are out of time. But clue good talk on for Asia, but thank you so much for your time bob. Thank you, Lucinda.