Seoul-based Coupang, an online retailer, announced today that it has raised an impressive $300 million in new funding led by BlackRock Private Equity Partners, with participation from Wellington Management Company, LLP, Greenoaks Capital Management, and Rose Park Advisors.
In an interview with TechCrunch, Coupang’s founder Bom Kim says that the capital will be invested in two key areas: the technology behind its mobile apps, which generates 70 percent of Coupang’s revenue and 80 percent of its total traffic, and its logistics network, which can provide delivery within the same day (or several hours in some parts of South Korea). It will also make additional hires for its engineering and research and development offices, which are located in Silicon Valley, Seattle, and Shanghai, in addition to Seoul.
The company is not disclosing its current valuation, but Coupang’s last funding round of $100 million in May, led by Sequoia Capital, put it at over $1 billion. Kim says that the company’s valuation has increased since then and its latest funding is an upround.
This represents the latest in a series of major investments in Seoul-based companies over the last two months. Yello Mobile and game developer 4:33 Creative Lab Game Studio each disclosed that they had raised $100 million or more, while Woowa Brothers, which operates food delivery app Baedal Minjok, raised a 40 billion won (about $36 million) round led by Goldman Sachs.
Coupang claims to be Korea’s “most well-funded private technology player,” with nearly half a billion USD in cash. In 2013, the company says it exceeded $1 billion in annual gross merchandise value and is currently operating at an annualized run rate of over $2.2 billion. It’s main competition is eBay Korea, but that is mainly a C2C business, while Coupang is a B2C play.
With that much cash in its coffers, why did Coupang raise again so soon?
“Our view is that this is still the very early stages of e-commerce. We all know what is going on with Amazon and Alibaba, but the mass of commerce is still occurring offline. We have an opportunity because of [South Korea’s] density and mobile infrastructure to do things that e-commerce companies will do in other countries eventually,” says Kim, who founded Coupang in 2011.
“We are addressing two fundamental friction points: with offline commerce, you can get a lot of information by holding a product in your hand, which we can’t provide digitally, but we are getting closer and closer to providing almost as rich an experience as an offline store. Another advantage of offline commerce is that you can take something home with you and use it right away. We can’t do that through your phone, but we are also getting closer and closer every day, by getting products to you within hours,” he adds.
Taking advantage of South Korea’s mobile infrastructure
While it’s easy to compare Coupang to Amazon, there are several key differences between the two companies and markets.
One is the breadth and speed of South Korea’s mobile infrastructure. When Kim founded Coupang four years ago, he says that smartphone penetration in South Korea was comparable to the U.S., but now it is the highest in the world.
Seven out of every 10 mobile phone subscriptions in the country are for smartphones, while top carriers SK Telecom and LG Uplus Corp. have deployed network services that they claim are four times faster than the previous iteration of LTE.
South Korea’s strong mobile network has allowed Coupang to take a mobile-first approach to developing its e-commerce platform. The company claims that its mobile apps have been downloaded 19 million times (to put that in perspective, South Korea’s population is 51.2 million).
“Everything is optimized, developed for mobile first, as opposed to other environments where you may look at mobile as a parallel or extension,” says Kim.
While Coupang’s peers in other countries, including Alibaba and Amazon, are still figuring out how to get more users to make purchases through their mobile apps, Coupang’s main challenge now is to build a mobile shopping experience that will come closer to replicating the feel of browsing for goods in an offline store. That includes adding more content and improving loading speeds.
“If you see how we present products, the amount of information and content is getting richer and richer, and loading speeds are faster than m-commerce platforms in the U.S. People say you can either have rich info and slow loading speeds, or little info and fast speeds. Solving that trade-off is a big part of what we do,” says Kim.
“That’s where I think technology helps us, so you can get a richer and richer experience, that is as close to holding, touching, and rotating a product in your hand as possible, but still provide you with a very quick experience that you can access on your commute to work,” he adds.
Building out Coupang’s logistics network
The second part of Coupang’s core strategy is building its logistics network in South Korea. Coupang has been offering same-day delivery or, in some cases, delivery within a few hours, since the beginning of the year. In addition to fulfillment centers, Coupang has its own fleet of trucks and drivers, which it calls “Coupang men.”
Kim says “Coupang men” don’t just deliver goods. They also serve as customer service representatives. In order to replicate the experience shoppers would have in department stores, Coupang men also do things like send handwritten thank you letters to customers and give out candy and product samples.
The company began experimenting with its own same-day delivery service two years ago, before it began to build its network of fulfillment centers.
Prior to that, Coupang relied on third-party carriers. In the U.S., companies that have also experimented with offering same day delivery services include Google, Amazon, and eBay (though eBay is now retooling its same-day local delivery offering, called eBay Now, because of the high cost of running the service).
Kim believes that Coupang’s same-day delivery model can eventually provide a model for e-commerce companies in other countries.
“People are trying to experiment with this in the U.S., and we feel like we solved it and are investing heavily in mobile logistics technology,” he says.
Coupang is keeping its eye on an initial public offering “when the time is right,” says Kim, but it is also looking to expand into other countries when their mobile infrastructure catches up with that of South Korea. In the near-future, however, Coupang plans to remain focused on South Korea, “which we believe to be a very exciting and fast-growing market,” says Kim.