The nation’s three leading mobile-focused retail giants logged combined losses of 831.3 billion won ($724.3 million) last year -- greater than the market had expected -- sparking concerns over their elusive profit structures.
Coupang, the largest of the three, said in its regulatory filing Thursday that its sales surged more than threefold to 1.13 trillion won last year, but with an operating loss of 520 billion won.
The other two, WeMakePrice and TicketMonster, also posted 216.5 billion won and 195.9 billion won in sales, but they both saw 142 billion won in operating loss.
In contrast to mobile retailers’ confidence on their business potential and their explanation that the losses were made due to massive investments in logistics capacity, concerns are growing over their profit structure aimed at expanding market share at the cost of leaving near-zero margins.
For the last six years, e-commerce giants have never come out of the red.
But they have argued that there is still plenty of room for growth, and they have secured enough investments to keep the business running.
Despite the rosy picture of the fast-growing e-commerce market, a market watcher warned retailers like Coupang that they should seek other profit models, stressing that their growth would reach a breaking point within two years.
“If Coupang does not improve its profit model by 2017, considering the growing costs for labor and logistics, its cash reserves will hit bottom,” said Lee Nam-june, an analyst at KTB Securities and Investment in his report.
In order to attract more investments, the retailer has to present fresh profit models, not just seeking revenue from retail margins, he wrote. Otherwise, Coupang’s growth strategy will come to an end without further investments, he added.
By Cho Chung-un (firstname.lastname@example.org