By Heekyong Yang
SEOUL, Feb 26 (Reuters) – Investors in South Korea’s e-commerce giant Coupang will be scrutinising the company’s financial results on Thursday for fallout from a massive data breach, as rivals lure shoppers away from its platform.
The company also faces headwinds from a proposed regulatory change that could increase competition in the ultra-fast overnight deliveries that have been a cornerstone of its market dominance.
Coupang’s position has come under threat after it reported a data leak in November that affected some 34 million users, exposing names, phone numbers and shipping addresses but not payment details or login credentials.
A government-led investigation is ongoing, but in an update this month the Science Ministry blamed management failure at Coupang rather than a sophisticated cyberattack. Coupang said in a statement that it would “take all necessary steps to prevent further harm and continue strengthening safeguards to prevent a recurrence”.
“Consumer trust in Coupang has been shaken,” said Lee Kwang-lim, an executive director at the Korea Chainstores Association, which represents large retailers like E-mart and Lotte Mart.
Coupang’s monthly active users on mobile phones fell by 3.5% in January from November, whereas rival platform Naver reported a 23% jump during the same period, according to data firm WISEAPP.
It also saw average daily consumer spending fall 6.3% to around 139.2 billion won ($97 million) in January from November, according to IGAWorks Mobile Index’s data.
Analysts have trimmed their average fourth-quarter revenue estimate for Coupang by 2.2% from the prior quarter, while the estimate for core earnings was cut by 6.7%, according to LSEG data.
New York-listed Coupang’s shares have fallen around 34% since the breach disclosure, while shares of traditional retailers and logistics firms have rallied.
The reputational damage comes at a time when a proposed regulatory change may also weaken Coupang’s position, which was built on its “Rocket Delivery” service, which allows customers to order by midnight for delivery before dawn.
For more than a decade, South Korea has restricted large brick-and-mortar retailers from operating overnight, a policy aimed at protecting small neighbourhood stores.
But because the rule did not apply to e-commerce platforms such as Coupang, which was founded in 2010 by Harvard graduate Bom Kim, it nurtured their rapid expansion.
The government said earlier this month it plans to ease late-night restrictions for hypermarkets, which will pave the way for more competition in delivery services.
Coupang did not respond to a Reuters request for comment.
Rivals like E-Mart, Kurly and Naver are already racing to expand fast-delivery offerings to challenge Coupang.
Naver CEO Choi Soo-yeon said recently the company saw “meaningful” rises in both the number of online users and the amount of money they spent in January.
CJ Logistics, which counts Naver among its customers, said shipment volume of overnight or one-day delivery jumped 120% in the fourth quarter from a year earlier.
Even so, some analysts predict its competitive prices and user familiarity with its many integrated services may keep rivals in check.
“There is still nothing quite as convenient as Coupang,” said Seo Jung-yeon, a senior analyst at Shinyoung Securities.
“The key question is … how effectively competitors seize this opportunity to gain share.”
($1 = 1,435.00 won)
(Reporting by Heekyong Yang; Additional reporting by Hyunjoo Jin; Editing by Miyoung Kim and Kevin Buckland)
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