Despite Compelling E-commerce Business, Korea’s Coupang Has a Blind Spot


Having followed the company when it was still a private-equity play, Coupang (NYSE:CPNG) still holds some sentimental feeling for me. An e-commerce firm primarily focused on the South Korean market, Coupang offers tremendous relevance. After all, it’s not just in the U.S. that online purchases have skyrocketed, drawing intense interest in CPNG stock when it was about to make its public market debut in March 2021.

A close-up shot of a Coupang (CPNG) delivery vehicle.
Source: Ki young /

Fast forward eight months and the situation doesn’t look all that appealing for the previously hyped company. At the time of writing price of $30.23, CPNG stock is conspicuously below its initial offering price of $35. Moreover, on its first trading session, shares eventually closed at $49.25. That means from where I stand, Coupang hemorrhaged nearly 39% of value.

Nevertheless, an argument exists that the hype train can once again bolster CPNG stock. Primarily, the novel coronavirus pandemic has incentivized Korean consumers to shift their purchasing activities online. Naturally, this benefits Coupang and the advantage can last longer than what U.S.-based e-commerce firms have enjoyed.

Part of the reason why Asian countries in general have handled the Covid-19 crisis better than other nations can be traced to better governance, according to Duke Global Health Institute. “Communication from public health officials and political leadership tended to be clear and consistent, reducing confusion and bolstering trust. Such efforts at transparency may explain why people in Asia have generally been more accepting of social distancing and face mask mandates.”

In other words, Asian citizens are more willing to voluntarily abide to social distancing requests to promote the greater good. And that translates very well for CPNG stock. Because in addition to this voluntary action, Coupang also features robust shipping options, often delivering products within one day of order placement.

What could go wrong?

CPNG Stock Faces Worrying Labor Issues

Obviously, if you look at the broader trajectory of CPNG stock, plenty of things can go wrong and have gone wrong. The Korean e-commerce giant isn’t exactly as easy of a narrative as the arguments on paper imply.

In particular, Coupang’s dependence on its shipping advantage could end up being a negative catalyst. It would be unfortunate, of course, since the one-day shipping convenience initially encouraged investors to take a stab at CPNG stock. But in the new normal, this logistical lead could boomerang back — and not in a positive manner.

As I explained when I sat down with CGTN America anchor Rachelle Akuffo, a major contributor to the global supply chain problem is the lack of truck drivers. Essentially, the middle component of the supply chain spectrum has a labor shortage. In the U.S., some of that shortage stems from lack of interested workers: the job isn’t the easiest in the world.

Well, an argument can be made that the problem in South Korea is much, much worse. As the World Economic Forum explained in December of last year, the rampant demand in online purchases has started to take its toll on delivery drivers. Indeed, some workers have allegedly died from exhaustion or have committed self-harm.

There’s a growing chorus for laborers’ rights South Korea, which may filter down to companies like Coupang. To remedy this crisis, businesses may have to shell out more money for their shipments, which would be a negative for CPNG stock.

Unlike Amazon (NASDAQ:AMZN), the folks delivering packages for Coupang actually work for the company. That allows them to control the full logistics loop from warehouse to the consumer’s door, noted Asia-focused DJY Research. But it also means the company has to be more mindful of the job satisfaction of those 15,000 or so folks.

If that wasn’t bad enough, Coupang’s financials are becoming suspect. Sure, its quarterly filings indicate robust sales growth — its modus operandi. However, operating losses ballooned in the six months ending June 30, 2021.

Labor rights remedies could exacerbate this problem.

Interesting Speculation but With Risks

To be fair, CPNG stock valued below its initial offering price is an attractive proposition. Therefore, I wouldn’t be opposed to speculators taking a careful position here.

However, those who are more conservative with their investing strategies may want to wait out Coupang for greater clarity. Its expenses are starting to become worrying. And legitimate workers’ issues may add more weight to the challenges facing CPNG stock.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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