Profit or Promise? Decoding Coupang's Global Expansion in Q1 2025

Yahoo

25-05-2025

Coupang (NYSE:CPNG) has rapidly grown into the dominant e-commerce player in South Korea, often earning the nickname the Amazon (NASDAQ:AMZN) of South Korea. The company's Q1 2025 earnings reflect not only sustained growth momentum but also an evolving strategic focus on margin expansion and ecosystem development.
In this article, I'll do a deep dive into Coupang's business model, recent financial performance, and the broader competitive and macroeconomic context.
Coupang's success is deeply rooted in its home market of South Korea, a country with a vibrant and fast-growing e-commerce landscape. South Korea's e-commerce market reached $230 billion in 2024 and is projected to grow at 13% annually to $336 billion by 2027. Despite the country's relatively small population, this growth puts South Korea among the top global e-commerce markets. Importantly, the adoption of online shopping is widespread. Over 80% of consumers shop online, which expands the total addressable market but also intensifies competition.
Source: Author based on Statista
Coupang holds a leading market share, capturing an estimated 2025% of South Korea's e-commerce market based on visitor traffic. In practical terms, roughly one out of every four online purchases in the country happens on Coupang's platform. Its consistent share gains are a result of a relentless focus on logistics and customer experience, two areas where it has clearly outpaced a fragmented set of rivals.
Recognizing Korean consumers' appetite for cross-border shopping, Coupang launched Rocket Direct, a service that simplifies international purchases by handling shipping, customs clearance, and final delivery. It's a strategically sound move that captures demand that might otherwise go to global platforms like Amazon or AliExpress.
Coupang's competitive moat is built on its integrated logistics infrastructure and obsession with customer experience. The company has built an extensive logistics network with over 100 fulfillment centers across South Korea, placing nearly 70% of the population within a 7-mile radius of a logistics hub. This enables its hallmark Rocket Delivery service, which routinely fulfills same-day or overnight orders. Customers who order by midnight often find their packages at their door by 7 am the next morning, an experience that has become core to Coupang's brand and market dominance.
Global giants like Amazon and Alibaba (NYSE:BABA) have a relatively limited direct footprint in South Korea. Amazon lacks local fulfillment centers, and while Korean consumers can access Amazon's global store, long delivery times and higher shipping costs diminish its appeal. AliExpress sees some use for niche or budget categories, but it, too, cannot match Coupang's speed or reliability.
Domestic platforms such as Naver and Gmarket operate as marketplaces reliant on third-party sellers and external logistics providers. The high logistical barrier to entry that Coupang has created, with billions invested in fulfillment centers, delivery trucks, and technology, means any new entrant (or an international rival) would face enormous costs to replicate it.
But Coupang's edge goes beyond speed. Coupang also built trust through its customer-centric policies, such as free returns and 24/7 support, following many of the customer-centric policies that made Amazon successful in the U.S. This has yielded over 23 million active customers as of Q1 2025, nearly half of South Korea's population. Management's focus is now on deepening engagement and increasing wallet share among these users, a logical next step for a platform of this scale.
One reason Coupang remains particularly compelling is that it's no longer just an e-commerce platform, it's steadily building an ecosystem of interconnected services, much like Amazon did with Prime, AWS, and its broader infrastructure.
Coupang Eats, the company's food delivery arm, stands out as one of the most significant among its newer ventures. South Korea's online food delivery market reached approximately ?29 trillion ($2223 billion) in 2024, a sizable addressable market dominated for years by Baedal Minjok (Baemin), owned by Delivery Hero.
Coupang has rapidly gained ground. In 2024, Coupang Eats' market share by credit card transaction value doubled to 35.3%, while Baemin's fell from over 70% to 57.6%. By early 2025, Coupang Eats had firmly secured the second position and was rapidly narrowing the gap.
A key driver behind Coupang Eats' rapid growth has been its tight integration with Coupang's core e-commerce user base and the Rocket WOW membership, where Coupang has aggressively leveraged it. In March 2024, Coupang launched a campaign offering free food delivery to WOW members, effectively using the Amazon Prime playbook in food delivery. The results were immediate. According to Mobile Index data, many customers shifted from Baemin to Coupang Eats, drawn by the value proposition of bundled benefits and faster delivery times.
WOW members receive added value through free and discounted Eats deliveries, which in turn deepens platform engagement. After introducing 510% discounts on Eats orders for WOW members, the company reported a 90% increase in Eats orders from that cohort, and overall transaction volume more than doubled in several regions. In my view, this type of synergy, where one service strengthens another, is where Coupang's ecosystem model begins to show its long-term advantage.
Coupang Play, the company's video streaming arm, is another point of the ecosystem aimed at increasing customer engagement. Bundled with WOW membership (similar to how Amazon bundles Prime Video), it offers a mix of licensed and original programming, including exclusive broadcasts of national sporting events. While Netflix remains the dominant streaming provider in Korea, Coupang Play has carved out a niche by offering localized content at no extra charge to subscribers. Though not a major profit center today, it increases the stickiness of the overall platform. Indeed, Coupang has found that WOW members who engage with multiple services have much higher retention and spend.
Management has also indicated that Coupang Play's engagement model is one they intend to replicate in other markets. For example, the rollout of WOW membership in Taiwan is expected to include bundled services like Coupang Play, further increasing time spent and overall spend per user.
Lastly, Coupang Pay, the company's fintech initiative, adds yet another layer of utility. While the Korean digital payments space is highly competitive, dominated by Naver Pay, Kakao Pay, and Samsung Pay, Coupang Pay leverages its built-in user base to streamline the checkout process and drive loyalty through rewards. Although margins in payments are thin, the real value lies in reducing transaction friction, collecting behavioral data, and laying the groundwork for future monetization through financial products.
In my view, over time, Coupang could potentially extend into areas like consumer lending or insurance (as Alibaba did with Ant Financial), but for now, the focus is on making payments seamless and adding yet another reason for customers to stay within Coupang's ecosystem.
Coupang's first international expansion into Japan was short-lived. Launched in 2021 and shut down by early 2023, the effort failed to gain traction in the face of entrenched competitors like Amazon Japan and Rakuten. But Taiwan has been a very different story. With its tech-savvy population of 24 million and cultural parallels to South Korea, it has emerged as a more natural fit for Coupang's logistics-driven model.
Coupang entered Taiwan in mid-2021, bringing Rocket Delivery to a market underserved by global e-commerce giants. Amazon lacks local infrastructure in Taiwan, and while regional players like Shopee, PChome, and Momo remain active, they don't offer the same delivery reliability or vertical integration that Coupang is known for. The market opportunity is meaningful. Taiwan's e-commerce market was valued at approximately $19.6 billion in 2023 and is expected to grow to $26.8 billion by 2028. Even capturing a fraction of that could represent billions in incremental revenue. Management has stated that they expect Coupang's Taiwanese operations to reach profitability faster than it did in South Korea.
In Q1 2025, Coupang reported a nearly 500% year-over-year (YoY) increase in product selection in Taiwan, fueled by direct partnerships with global brands like Coca-Cola (NYSE:KO) and P&G (NYSE:PG). This surge in selection has driven higher engagement, with customers returning more frequently and spending more.
One recent development was the launch of the Rocket WOW membership program in Taiwan during the quarter. Much like in Korea, WOW offers customers free delivery and additional savings. Early results suggest it's already increasing customer spend and loyalty. If this mirrors the Korean experience, WOW could become a foundational pillar of Coupang's Taiwanese operations.
In January 2024, Coupang acquired the business and assets of Farfetch for $500 million. Based in London, Farfetch is a global luxury fashion marketplace that connects consumers to high-end boutiques and premium brands around the world. The logic behind the deal was twofold.
First, it opens the door into the global personal luxury goods market, an estimated $300$400 billion segment. The category has been growing steadily, particularly in Asia, where South Korea ranks among the world's highest in per-capita luxury spending.
Second, Coupang brings operational leverage. One of Farfetch's historical challenges has been the complexity of global fulfillment. Coupang's logistics network and experience in handling fast deliveries could improve Farfetch's customer experience. Whether through regional warehousing or streamlined cross-border shipping, Coupang is well-positioned to enhance delivery speed and reliability for high-value goods.
In the months since the acquisition, Coupang has made significant progress in aligning Farfetch with its broader platform standards. In Q1 2025, management reported that Farfetch was nearing breakeven, an important milestone for a business that had been deeply unprofitable. They also highlighted operational improvements consistent with Coupang's core principles of speed, reliability, and service quality.
Looking ahead, 2025 is likely to be a year of synergy realization. I expect Coupang to explore cross-platform integrations, such as surfacing Farfetch listings within the main Coupang app or offering exclusive perks for WOW members. Local luxury boutiques using Farfetch may also benefit from Fulfillment and Logistics by Coupang (FLC), gaining access to faster, more reliable distribution across Asia.
It's still early, but if Coupang executes on this front, Farfetch could do more than just add incremental revenue. It could elevate Coupang's brand equity, attract a more affluent customer base, and increase average revenue per user.
Coupang's Q1 2025 results highlight a business that continues to grow at a healthy pace while expanding its margin profile. Net revenue reached $7.9 billion, up 11% YoY or 21% in constant currency. Gross profit climbed 20% to $2.3 billion, lifting gross margin by 217 basis points (bps) to 29.3%. Although reported net revenue per active Product Commerce customer fell 3 % YoY due to currency headwinds, it rose 6 % in constant currency to $1,284 on a trailing-twelve-month basis, evidence that Coupang is already monetizing its user base effectively, even before higher-margin services like fintech, advertising, and Farfetch meaningfully scale.
Profitability has also improved at the operating level. Net income attributable to Coupang stockholders came in at $107 million, an improvement from breakeven levels a year ago. Adjusted EBITDA reached $382 million, representing a margin of 4.8%, up nearly 90 bps YoY.
Warning! GuruFocus has detected 7 Warning Signs with CPNG.
Source: Coupang Q1 2025 Earnings Release
There were some one-off factors affecting YoY cash flow comparisons. Even though management noted that certain non-recurring working capital benefits flattered the prior year's cash flow, free cash flow rose to $144 million (including net borrowing) in the quarter, a 38% YoY increase. Over the trailing twelve months, Coupang generated $2.0 billion in cash from operations, which continues to support both reinvestment and balance sheet strength.
Despite ongoing capital expenditures to expand its logistics moat, the balance sheet remains in excellent shape. As of Q1, Coupang held $6.1 billion in cash and equivalents against just $1 billion in debt.
From my perspective, Q1 confirms that Coupang is increasingly converting scale into operating leverage. While top-line growth in the core business is moderating to a more sustainable low double-digit range, margins are improving meaningfully. That balance between growth and efficiency is exactly what long-term investors should want to see at this stage in the company's evolution.
Meanwhile, losses in newer business segments are also narrowing. The Developing Offerings segment, which includes Taiwan, Eats, Coupang Play, fintech, and Farfetch, posted an adjusted EBITDA loss of $168 million, an $18 million improvement from the prior year. While still in investment mode, this segment is trending in the right direction.
It's also notable that Coupang's board authorized a $1 billion share repurchase program, its first since going public. For a company still viewed primarily as a high-growth reinvestment story, the move signals growing confidence in the sustainability of its free cash flow. Management's willingness to return capital while continuing to invest for long-term growth reflects a more mature phase in Coupang's life cycle.
Despite Coupang's improving financial profile and consistent growth, the stock's valuation continues to be a point of debate. On traditional metrics such as price to earnings (P/E), Coupang may appear expensive, as it has only recently achieved GAAP profitability. The trailing P/E remains elevated due to limited net income over the last twelve months. However, for growth companies like Coupang, other metrics are more relevant.
Currently, Coupang trades at a discount across most valuation metrics. Coupang trades at a price to sales (P/S) multiple of 1.6x, while Amazon trades at 3.4x, Alibaba at 2.0x, and Sea (NYSE:SE) at 5.3x. In relative terms, Coupang's valuation reflects a combination of earlier-stage profitability and what I believe is a Korea discount, where some investors are unsure if it can grow outside its home market.
Source: Author
Another way to assess the opportunity is through a discounted cash flow analysis that blends multiple-based and perpetuity growth assumptions. I estimate a fair value of around $32 per share, suggesting a potential 20% upside from current levels.
Source: Author
Finally, it's also worth noting that institutional investors have recently adjusted their positions in Coupang. Dodge & Cox doubled its stake in Coupang last quarter and now holds approximately 2.25% of the shares outstanding. Meanwhile, Baillie Gifford (Trades, Portfolio) maintains Coupang among its top ten holdings, despite a modest 3.6% trim in the quarter. Baillie's portfolio makes clear that they are all-in on e-commerce. Mercado Libre and Amazon are their two largest positions, followed by other digital commerce platforms like Sea Limited, direct peers of Coupang. Coupang's inclusion alongside these names reinforces the view that it belongs in the same conversation and that Baillie Gifford (Trades, Portfolio) sees long-term upside in the company's execution and market leadership.
While Coupang continues to grow and gain market share, several risks remain.
In South Korea, Coupang is the market leader, but the landscape remains competitive. Naver, with its dominant search engine and integrated marketplace, continues to be a formidable rival. Gmarket and 11st cater to price-sensitive shoppers, and SSG.com (backed by Shinsegae) leverages its offline assets in groceries and department store inventory. While Coupang's logistics moat is difficult to replicate, any meaningful service-level improvements from these incumbents could slow its momentum.
Baemin, still the market leader, benefits from scale and brand familiarity, but Coupang Eats is gaining quickly. With over 10 million active users and rising share, Eats is on a strong trajectorybut maintaining that trajectory will likely require sustained investment. If Baemin responds with aggressive promotions or loyalty programs, margin pressure could intensify.
In streaming, Coupang Play competes with global platforms like Netflix (NASDAQ:NFLX) and Disney+ (NYSE:DIS), as well as local players such as Wavve and TVing. Netflix currently leads the market by a wide margin, thanks to its extensive catalog of Korean content. However, Coupang Play has shown traction by targeting local content and live sports events. Though not a direct profit engine today, it adds stickiness to the ecosystem. In my opinion, the goal here is to increase the value of WOW membership and keep users within the Coupang umbrella for more of their entertainment time.
The same logic applies to Coupang Pay. It operates in a crowded and fragmented digital payments landscape alongside Kakao Pay, Naver Pay, and traditional credit cards. Margins are thin, and switching costs are low. Here, the focus isn't on market dominance, but on streamlining transactions and capturing data to enhance the broader ecosystem.
In Taiwan, Coupang faces different dynamics. Shopee remains the dominant platform, with strong brand equity and logistical reach. Local players like PChome and Momo also have loyal user bases. Coupang's value proposition of fast delivery, growing selection, and WOW membership gives it a competitive edge, but loyalty isn't guaranteed. If competitors step up with pricing or logistics improvements, Coupang may be forced to increase promotional spending to defend its share.
Beyond competition, macroeconomic risks deserve attention. While Coupang noted minimal impact from tariffs or inflation in Q1 2025, global supply chains remain vulnerable, and consumer sentiment can shift quickly. A prolonged economic slowdown in Korea or Taiwan could weigh on discretionary spending. Currency is another factor. A weaker Korean won has already dampened reported USD revenue growth. If it continues, it could inflate the cost of imports and tighten gross margin.
Coupang continues to show why it's more than just a dominant e-commerce player in Korea. The company is steadily expanding its reach, improving margins, and investing in long-term growth, all while maintaining a disciplined capital approach. Risks remain, particularly around competition, execution in new markets, regulatory scrutiny, and macro volatility, but the business has never been in a stronger position.
Coupang is building an ecosystem that increases customer lifetime value and operates with a mindset of continual innovation, whether it's rolling out new services like FLC for merchants or leveraging automation and AI in its logistics network. I believe that if Coupang maintains its current level of execution and operating leverage, it has the potential to be a long-term market beater.
This article first appeared on GuruFocus.