Delivery trucks for e-commerce retailer Coupang leave a distribution centre in Seoul, South Korea. Picture: REUTERS/JOSH SMITH
Delivery trucks for e-commerce retailer Coupang leave a distribution centre in Seoul, South Korea. Picture: REUTERS/JOSH SMITH

Seoul — SoftBank Group’s Vision Fund was investing $2bn in South Korea’s top e-commerce company Coupang, the retailer said on Tuesday as the unprofitable start-up got prepared to battle rivals backed by the country’s cash-rich chaebol.

The latest investment follows the $1bn that SoftBank invested in Coupang in 2015 and valued the eight-year-old start-up at about $9bn, said a source close to Coupang.

Coupang has grown rapidly to become a major player in the country’s e-commerce market. It clocked 2.7-trillion won ($2.4bn) in revenue last year, with its online sales almost as much as the next three largest e-commerce sites in the country combined, according to research firm Statista.

But it also posted big losses, totalling 1.9-trillion won ($1.7bn) over the past five years as it poured money into building new technology and its logistics infrastructure.

“The $2bn we are receiving now is exciting, because we can invest in more technology platforms that enable this innovation,” said Coupang founder and  CEO Bom Kim.

In the race to differentiate itself in a market that delivery companies and big conglomerates are thronging, Coupang has moved beyond being just a website and a collection of warehouses by pouring resources into building up a huge delivery network.

It also made a splash with its Rocket Delivery service, which promises delivery within 24 hours, as well as the more recent Dawn Delivery service.

"The reason we were able to do that in such a short period is because of that technology investment we made over the years," Kim said.

Coupang said its revenue doubled in the past year and was approaching $5bn for 2018.

But the losses incurred in building out that large infrastructure and workforce have raised questions about whether Coupang can compete long-term, especially against more established players such as E-Mart and Lotte.

Reflecting ballooning losses, the $1bn previous investment by SoftBank was marked down by 30% to $700m when it transferred the Coupang stake to the Vision Fund this year.

For SoftBank and its $98bn Vision Fund, Coupang marks another significant investment in an unprofitable start-up, as they seek to put a huge pool of capital to work and earn an attractive return.

SoftBank was also injecting an additional $3bn unprofitable US shared-office space provider WeWork, Reuters reported this month.

“We believe the company is well-positioned to lead the Korean e-commerce market, with significant platform opportunities ahead, given its data, payments and logistics advantage,” said Lydia Jett, partner at SoftBank Investment Advisers and a Coupang board member.

While Coupang had been considering 2019 for an initial public offering, this new round of financing made that a more long-term goal, said Jett.

“It’s still on the road map, but I think there is still a lot of room to continue to expand the value proposition for the customers before we do that,” she said.

With strong technological and mobile adoption, South Korea was one of the biggest and fastest-growing e-commerce markets worldwide. Its retail e-commerce volume would grow to $32.6bn by 2021 from $19bn in 2016, Statista research said.

In January, E-Mart and its parent company Shinsegae announced a plan to use a $940m investment from private-equity firms to expand their online offerings.

Reuters