Investors are always looking for the next Amazon, that company which could deliver outstanding investment returns over long periods. While there will never be another Amazon, investors can occasionally find companies that have closely studied and replicated Amazon’s business model in other parts of the world.
Let’s take a look at one company that has successfully implemented Amazon’s playbook in Korea: Coupang (CPNG 1.02%)
Image source: Getty Images.
An e-commerce giant (and more) in Korea
Founded in 2010, Coupang became a leading technology company in Korea with business spanning e-commerce, online grocery, food delivery, online streaming, fintech, and more. While it has diversified into other segments over the years, Coupang’s core business remains in e-commerce, with around 25% market share in Korea.
The fundamental tenet of Coupang’s e-commerce offerings is simple: low prices, fast delivery, and superior customer experience, all at once. To achieve that, Coupang has invested heavily in an integrated end-to-end infrastructure (thanks to the backing of deep-pocket investors like SoftBank) to deliver a “wow” experience to customers every day.
Coupang’s heavy investment went mainly into building a world-class fulfillment and delivery network. The company designed and built over 100 fulfillment centers covering 47 million square feet and housing millions of products. Up to 70% of the Korean population lives within 7 miles of a Coupang logistics center.
With its infrastructure in place, Coupang can offer various services to satisfy customer needs. For instance, it provides dawn delivery (delivered by 7 a.m. for orders placed up to midnight), same-day delivery, and free next-day delivery nationwide for all customers. It also offers frictionless return — customers tap a button on the app and leave the item outside their door for pickup.
Like Amazon’s Prime membership, Coupang has a Rocket WOW membership service. Members can enjoy unlimited free shipping with no minimum spend, 30 days free unlimited returns, content streaming on Coupang Play, and more. And customers love it, which explains the rapid growth of WOW members from 6 million in 2020 to 14 million in 2023 (two-thirds of its 21 million active customer base).
In many ways, Coupang aims to recreate (and even exceed) Amazon’s experience for consumers in Korea. So far, it has been quite successful, with revenue nearly doubling from $12 billion in 2020 to $23.6 billion in 2023. And despite its success, there are good reasons to expect the future to be equally bright.
Coupang’s prospects in the next few years
Coupang’s rapid expansion has turned it into a massive company in Korea. However, compared to the opportunity ahead, the e-commerce company has just touched the tip of the iceberg.
For instance, the total commerce market in Korea was $483 billion and is expected to reach $563 billion in 2027. So, while Coupang might be a whale in the e-commerce market with a 25% market share, it is at most a big fish in the ocean for the whole retail industry. Coupang’s revenue of around $24 billion is less than 5% of this gigantic market.
Coupang will continue to invest in the latest infrastructure and technology to keep its growth machine spinning, allowing it to delight its customers with ever-better services and lower prices. It is also leveraging its existing infrastructure and customer base to launch new services like food delivery, online groceries, and online streaming.
Beyond its home turf, Coupang has recently expanded into overseas markets such as Taiwan. In the latest earnings call, the management team shared that revenue and customers in Taiwan have more than doubled over the last two quarters alone and that the market has a better growth and adoption rate than Korea.
Suffice it to say that Coupang has enormous growth opportunities to keep it busy for many years.
What it means for investors
Countless companies have tried replicating Amazon’s playbook in other regions or categories. So far, most have failed, and Coupang is one of the few exceptions. Better still, the company can still grow for the foreseeable future.
Still, investing in Coupang will expose investors to other potential complexities due to the differences in culture and language, along with the distance. So, the stock is not for everyone. But for those willing to handle the downside of owning foreign companies, it’s worth keeping Coupang on your radar.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Coupang. The Motley Fool has a disclosure policy.
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