Kim Bom-suk, chairman of the board at Coupang Inc. Yonhap News
Bom Kim, chairman of Coupang Inc., the U.S. parent company of Coupang, said on the 5th that customer spending is recovering to previous levels following a personal data breach. The company plans to accelerate its profitability recovery starting next year, including cutting the marketing costs it had increased to win back customers.
Speaking on Coupang Inc.’s second-quarter earnings conference call, Kim said, “Customers have not simply returned but are recovering to their previous spending levels. Most of the spending that had stopped is occurring again, and new customers are also coming in.”
He particularly stressed that spending by customers who continued using Coupang even after the data breach showed strong growth. “Excluding customers who left during the incident period and have not yet returned, total customer spending grew 16% year-on-year,” Kim said. “This is close to the 17% Product Commerce growth rate in the second quarter of last year, before the incident occurred.”
He added, “The gap between the 16% growth rate and the 8% Product Commerce growth rate reported this time is mainly attributable to the spending void from the customer group that has not returned. We will continue to work to win these customers back, and we are continuing to resolve the disruption.”
In connection with this, Coupang Inc. announced in its second-quarter consolidated earnings report filed with the U.S. Securities and Exchange Commission (SEC) that day that active customers in Coupang’s core Product Commerce segment reached 24.7 million. This is the same level as in the third quarter of last year (24.7 million), before the incident occurred. Coupang’s active customers had fallen to 23.9 million in the first quarter of this year.
Kim identified next year as the timing for Coupang Inc.’s profitability normalization. “This year’s recovery pattern will not appear in a straight line,” Kim said. “As the timing of holidays and seasonal cost patterns affect quarterly results, the recovery trajectory will continue into next year.” He added, “Once the affected period fully passes next year, we expect Product Commerce to return to the growth rate and margin structure it previously achieved.” Kim particularly expressed his intent to strengthen profitability from next year, saying, “We intentionally increased marketing spending to win customers back, but we plan to reduce this next year.”
The company will also continue to improve productivity through logistics automation and artificial intelligence (AI). “AI and logistics automation are continuously improving productivity across our logistics network and services,” Kim said, forecasting that AI will play a role in amplifying the value of the assets Coupang has built.
“The assets we have built over the past 15 years are our physical network, the operational data accumulated in the process of handling, packing and delivering billions of orders, and the direct relationships we have with tens of millions of customers,” Kim said. “Applying AI to the customer experience will improve product discovery, personalization and service quality, leading to increased productivity and reduced service costs.”
In addition, regarding the fire at the logistics center in Seongnam-dong, Incheon, that occurred last month, Kim explained that the impact on customer service so far has not been significant. “There has been no major disruption to activities aimed at meeting customers’ service expectations,” Kim said. “We are using our flexibility to provide services to customers, and it is still too early to assess the financial impact. We are working closely with stakeholders to determine the extent of the damage to assets.”
In connection with this, Coupang Inc. noted in its second-quarter consolidated earnings report disclosed to the SEC that “the total book value of the facility’s own inventory and fixed assets before the fire, along with obligations related to sellers’ inventory stored at the facility, is estimated at approximately 350 billion won.” This loss is expected to be reflected starting in the third-quarter results.
Meanwhile, Coupang announced that day that its second-quarter operating loss was 835 billion won, swinging to a loss from a year earlier. This marks two consecutive quarters of losses, following an operating loss of 354.5 billion won in the first quarter. The second-quarter net loss was 856 billion won, turning to a loss from a year earlier (43.5 billion won).