![Bom Suk Kim Coupang CEO]()
- Bom Kim is the CEO and founder of Coupang, the largest online seller in South Korea.
- Coupang has been called "the Amazon of South Korea" for its dominant position in the country, but Coupang employs a different model from its US counterpart.
- The company has invested heavily in delivery and logistics to control a complete shopping experience for customers.
- In an interview with Business Insider, Kim explains how Coupang got to the top via multiple pivots and an IPO that was canceled at the last minute.
Coupang was founded in 2010. But you'd be hard-pressed to find a company that has changed more in eight years than it has.
CEO and founder Bom Kim took the company from an online marketplace to a direct seller to an integrated online-shopping destination and delivery system. He calls it an "end-to-end" solution — meaning that from order processing to delivery, the company is in complete control of how customers experience the company.
It's that latest iteration that has taken Kim and his company to the top of the South Korean e-commerce market in terms of sales. The company is now approaching $5 billion in annual revenue and is projecting 70% growth by the end of this year, though it did post a loss of almost $600 million in 2017, according to Bloomberg.
In an interview with Business Insider, Kim explains how Coupang got there via multiple pivots and an IPO that was canceled at the last minute.
The following interview has been edited for length and clarity.
A pivot that paid off
Business Insider: Start from the beginning.
Bom Kim: Well, the company's gone through different iterations. The most recent version of the company, I think, is about three and a half years old. If I take you back a little bit, one thing that's been consistent about the company since day one is our mission. And I know this will sound corny, in some ways, but it really is part of our DNA. We really are serious about it. And it's not quite evident when you hear it for the first time.
Our mission is to create a world where customers ask, "How did I ever live without Coupang?" And what I mean by that is, we don't believe that a company should exist or that a company should be created to strive for a five or 10% better customer experience. It's just a waste of our passion, our time, talents. Our vision, our goal, what we aspire to, is to create a customer experience that's a hundred times better. And when you create something a hundred times better, people point to it and say, "I can't imagine life without that."
And about four years ago, we were a pure marketplace. So we were essentially a platform that connected customers with sellers.
BI: Like an Ebay?
Kim: Like an Ebay, that's right. Which is pretty much everyone in the market. And we were over a billion dollars in transactions, profitable, growing very, very fast, actually deep in the process of going public.
But I had this moment of clarity where [I asked myself], "Is this really living up to that mission?" And I would actually do the orientation in those days to all the new hires. ... The DNA, the company was so wrapped around this mission, and I couldn't reconcile it. Because we were, essentially, not there. Not even close. We're still a long ways away.
So, we took a bold step to basically stop the IPO process, and to go and invest heavily, go from a profitable company to a company that started to invest heavily into integrating everything from the customers' experience, starting from the mobile phone, all the way to the customers' door. So we built, now, in just over three and a half years, 150 soccer fields' worth of fulfillment centers across the country.
Read more:How 'the Amazon of South Korea' pivoted to dominate the country's online-shopping scene in just 4 years
But it's not just fulfillment centers, which is probably the model you're more accustomed to in this market. We had to build the last-mile logistics as well. Because there weren't big, structured, sophisticated players like UPS in the market. And we couldn't. And the market is very dense. The landscape is very different. One apartment complex next to our office has, in one New York City block, 19,000 residents. So it's an incredibly different challenge.
And we decided that we wanted to deliver all of our packages, within one day, to the door. So not dropped off at the bottom of your building, but to the door. And we set out to integrate everything with technology, so that even at the last inch, meeting the customer, our delivery people would have CRM tools.
So for example, if you have a baby, and you don't want the doorbell to be rung, our delivery personnel would know that and would knock on the door. Or if you prefer your packages to be left behind a potted plant, we'll know exactly where you like it, and if you happen to meet a delivery person, they'll know if this is your first purchase, and they'll say, "Welcome to Coupang." Or if it's the first purchase in a while, they'll say, "Welcome back."
And it goes beyond that. So now, we've launched dawn delivery, and same-day delivery. So typically, when you think about kind of five or 10% better experiences, they don't fundamentally break inherent trade-offs. So one trade-off that I think customers have come to expect in e-commerce is between speed and selection. So you can have vast selection, but slow delivery. Or if you want delivery within hours, you can get it, but it's very limited selection.
![Coupang]()
So typical delivery-within-hours services that you've seen, probably, are in the tens of thousands of items, for example. What we're now offering is our dawn delivery service. You can order until midnight, and [have it] delivered to the customer's door before 7 a.m. So within hours. But not just for a few tens of thousands of items, but for millions of items, which [is] thirty times that of the largest Walmart. And it covers everything from apparel, to electronics, to even fresh and frozen foods.
Because we're fully integrated, if you think about doing a typical return or exchange, you have to print out a label, you have to put it in a box, tape it up. Well, we're integrated end to end. So let's say you order something, some shoes that are too big or too small, and you want to exchange them. You don't have to print out any label, you go on the app, you request it, and if you do it in the morning, within that day, we'll come and exchange it for you. You just leave it outside your door. And it's almost like open sesame, close sesame. It's already exchanged.
BI: How are you able to get millions of items so close to customers? Is it South Korea's dense geography?
Kim: Part of it is geography because it's an incredibly dense market. And a lot of Asian cities are developing this way. It's not the suburban sprawl that you see in maybe some cities in the US. The cities are very vertical, very dense. But it's also because we've built the end-to-end integration. So we actually have, for example, all kinds of delivery personnel. We actually have delivery personnel that pick up and deliver only by foot, for example.
BI: Sounds like a lot of people.
Kim: It's a lot of people, yeah. I mean, e-commerce is a big employer, even with a lot of automation and a lot of technology. Really, whether it's determining, whether it's inventory management, supply-chain management, or figuring out the routes, figuring out the most efficient way to pick and pack the fulfillment centers, all the way to the routing of the trucks. Everything is actually driven by technology, but it still involves a lot of people. It's physical goods.
BI: But it's all end to end. So are there any interesting efficiencies there?
Kim:Now, over half of our packages are boxless. Also, this is another example of how ... you solve some of these interesting inefficiencies, and actually end up helping customer experience. So one of the biggest complaints about ordering a lot of e-commerce is that you get boxes and boxes piling up in your house, and it's especially a big issue in apartments in cities where you don't have a lot of space, like Manhattan.
Typically, why do you need boxes? Because you need to protect the item. You give it to UPS, and they're gonna put it through their sortation, and the items have to be protected, or they'll be damaged before they get to the customer. Well, if you're end to end integrated, we [can] actually deliver, even detergent, which some people call "liquid bombs." There's not even bubble wrap on it. It's in a clear plastic bag. Once it leaves our fulfillment center, it never goes horizontal. It always stays vertical, all the way to the door.
It also saves a lot of space in the trucks, because about a third of the space in a truck is air. And also, you save material cost, so you actually end up using a lot less material for packaging.
Millions and millions of customers
So we have millions of customers who are purchasing over 50 times a year. So if you think about that, it's practically every week.
We believe that the first focus was to create habituation, and to create an ease in a customer's life, a convenience in the customers' lives that they could experience over and over again. And then, they expanded their purchasing behavior to include electronics and apparel, and now, even fresh and frozen foods.
We're able to, because of technology, because of our economy's scale, we're able to drive a lot more efficiencies out of it than the traditional separate e-commerce and separate third-party logistics.
BI: Was there an epiphany moment where you came to the realization that this could be Coupang's future instead of what you had been doing?
Kim: When we were a pure, unstructured marketplace, the rationalization we had internally was that we were creating a better customer experience by investing in customer service. So if you had a problem, even though the experience was still controlled by third parties ... we took care of you. At some point, somebody mentioned to me, "That's like being better at apologizing as a spouse, but being no better a spouse."
![Coupang]()
Because we weren't, fundamentally, making the experience better. We were just really good at following up with you, and taking care of you when things went bad. And we noticed that over half the calls, customer complaints, consistently, were all related to delivery. It was either the wrong item was there, or it was mispackaged, or it was delivered late, and we realized it was because there was a lack of technology integration to the supply chain, and that we had an opportunity. It was going to be a long-term plan. But if we built the right foundation, if we invested in the technology, and the infrastructure, in the long run it could produce a better customer experience, a much, much better customer experience at a lower cost.
BI: It sounds like customers are really liking what you're providing.
Kim:We're not where we want to be yet, but we're getting closer every day. We have a payments platform, also, that's a true one-touch mobile payment platform. One thing that people might not know about us is that 90% of our transactions happen on mobile.
When transactions happen on mobile, they happen at night. That's one thing we've noticed, is that the PC usage time is during the day. Because if you think about it, that's when people are at the computer.
But mobile adapts more to the natural lifestyle of the customer. Because now the customer can buy or browse whenever she wants, whether it's in the morning, day, your mobile phone is with you, your smart phone is with you throughout the day. And what ends up happening is customers are browsing multiple times, but a fair amount of purchasing late. So one-third of our orders are happening between 10 p.m. and midnight. The last two hours.
And at night, if you're just kind of a pure marketplace, you rely on tens or hundreds of thousands of sellers. These sellers are not operating 24/7. They don't have fulfillment centers that are operating or automated and running 24 hours a day, so the beginning of the customers' expectations start with a purchase in the middle of the night. And that's why we focused on dawn delivery so much, because we realized so much of our purchases were happening when customers are now leaning back in bed and ordering before, and organizing, and kind of assessing what they needed, and making a final decision before they went to bed.
And we realized that a typical pure marketplace experience, the sellers would get that order in the morning. By the time the sellers get that order, we're already in front of your door. And when you really bend towards what the customers want, and you look to create that hundred-times better experience for customers, you're starting with the customers.
Moving fast and creating things
BI: Is it just trying to more seamlessly integrate into people's lives, where it's fitting in with what people are already doing, or with what people would naturally do?
Kim:Yeah. Just solve those friction points. Don't make customers have to adapt to your hours, to your constraints. Really, work from where the customer's natural behavior and natural habits lie, and tailor your experience so that they feel the service is seamlessly integrated with their lives.
![coupang]()
One of the things that I think has been a hallmark of our company is just the agility. So it's only been just over three and a half years since we made these massive investments. And we're now operating billions of dollars in revenue, and we've actually delivered over a billion items to the customer.
We launched a cold chain supply to more than half of the country in less than 30 days. And actually, our most recent offline food-ordering app, we launched that from conception to launch in three weeks.
BI: How?
Kim:It's, in part, because of our culture. But it's also in part because of the foundation of technology that we've invested in. I mean, once you've built the technology and the physical infrastructure, you're building applications on top of it. And I think that we're reaping the fruits of many years of investment as well.
And in part, also, just our fast-moving DNA.
BI:I think that puts a lot of companies that think they move fast to shame.
Kim:Asia is moving very, very fast. And I think the cycles of iterations are moving so fast.
Delivering 'one out of every two diapers'
BI:So who are these customers? Who orders from you most often?
Kim:It's everyone. It's really everyone. There are different customers. We did start with consumables, so some of our early customers were moms. Actually, one out of every two diapers, online or offline, has actually been delivered by our service.
But it's not just moms. I mean, we're the largest, we're actually the largest retailer, online or offline, in many, many categories. And because it's not just moms who want fast delivery, it's not just moms who are ordering at night, who have busy days. You know, you finish the day, you come back from work or school, and you're in bed and collecting your thoughts, and figuring out what you need to get.
The modern consumer is busy, has a smart phone, has the ability to browse throughout the day, order any time of day, including late at night, and also, has really wide tastes. It's not going to be fulfilled by limited offline selection. So the largest offline retailer selection that you can find offline is a hyper mart, like a Walmart, that tends to be in the 100,000-to-150,000-item range. Online, of course, has the opportunity to provide you a vast selection.
People talk about machine learning a lot. And we've tested it in a lot of different areas. One area that really, really has increased customer satisfaction, our conversion, exponentially is applying it in recommendation.
So for example, typically, the rule-based algorithms for recommendations is, people who viewed this, viewed that. People who purchased this, purchased that. And that's a very simple, rule-based algorithm. But what if you're dealing with new selection? Or selection in certain areas like fashion, which is constantly changing every season? An item that hasn't been viewed at all? How does that make it into the algorithm?
![Coupang]()
So we actually applied, fed the data into machine learning. And we found that, and the machines found patterns in the data, that we didn't even see, and started recommending items that had never been viewed in combination with that item, recommending items that had never been purchased.
A huge percentage of our sales is now increasingly in apparel. So that's actually a whole other world where you're not talking about looking up your computer model. It's really helping customers discover things.
And I think now we're getting to the stage where we're providing more than just structured data. We're actually helping customers understand their desires, which is another level of value that is an exciting area that we're also investing a lot in the technology behind.
BI: The big e-commerce giants are not in South Korea, right? I'm talking about Amazon, obviously. First of all, why didn't they see this opportunity that you saw in South Korea?
Kim:I don't know. I can't speak for them. I don't know if they saw it or didn't see it. I do know that the Korean market has not been, historically, a friendly market for multinational giants. Google has a 4% share in the search market, so it's a place where even Google couldn't conquer. Walmart came, and failed, and lost, and eventually ended up leaving the country. McDonald's is not the largest fast-food chain in that market. All of these players lost to local players.
Fundamentally, people are the same everywhere. The laws of human nature are the same. But there are different constraints. This is a market where people live in very dense neighborhoods. Walmart built big, huge, suburban stores in this market and followed their model. And that just doesn't work. Even suburban Korea is basically a confederation of satellite cities. And it's just too difficult. So basically, this is a market that has different constraints, that international giants have misunderstood and found difficult to penetrate. And it's historically been a market where the local players have succeeded.
BI: So you've had some significant investments, especially in the last years. Billions of dollars. I find it hard to believe that all of these investors would be happy if you just stayed in Korea, right?
Kim: Well, it's the fifth largest e-commerce market in the world. And it's on pace to become the third largest e-commerce market in the world in just three years.
It's a huge market. And it's growing very, very fast. So I think the home market for us is still very much the focus. Now, the constraints that we are solving for, high penetration of smart phones, people living in vertical, dense cities. These are similar challenges that you would find in other emerging Asian economies as well.
So I think there are possibilities of the platforms that we're building translating in other markets, but our focus, right now, is very much in our home market.
BI: The most recent $2 billion investment [from SoftBank's Vision Fund] — what, directly, will that go into?
Kim: We're now in this position to take a step back and leverage some of the investments that we've made to go deeper, to scale some of the investments that we have made, and also, now, to make additional investments in other areas, to touch other corners of the customers' lives.
BI: This might be a question that you don't want to answer, but, you say you try a lot of new things. What are some things that you tried that didn't work out?
Kim:The best thing to make sure that you don't become risk-averse is to have a short memory.
We didn't always start with our last mile. We thought that building the fulfillment centers, which is a huge investment, would be enough to partner with existing last-mile logistics players.
BI:Which would kind of be like the Amazon model?
Kim:That's right. And it just did not end up working out in the market. The infrastructure was too weak in terms of that last-mile infrastructure, the vast majority of drivers were independent contractors working for these companies. The technology integration was very weak. So we couldn't get that level of consistency.
BI: So you canceled one IPO. Now you are a different company. Any plans in the future? Or are you mostly focusing on investment right now?
Kim: At some point, an IPO is in our future. I don't think there's any specific time table I can share right now. We're really excited that we can invest in a number of areas today. Because the opportunity is so vast, we're just scratching the surface here.
BI: Do you want to become profitable before you plan for a public offering?
Kim:Right now, we're just so focused on building a foundation for the long term. We're very fortunate to have investors who share our long-term vision, and I think the market — and the opportunity for customers' lives to be changed — is so huge right now. I know it feels like we are, but it's just so early in that evolution, that our investors [think], and we are aligned, that this is the time for investment.
BI: The growth is exponential. How hard is that to control?
Kim: The challenge is: can you continue to provide more and more services that customers love, while making sure that your existing experiences are scaling and are maintaining that level of consistency? Customers' expectations only go up. They only go up.
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