A view of Kurly's Gimpo logistics center [Kurly]
A view of Kurly's Gimpo logistics center [Kurly]

South Korea's e-commerce sector posted a disappointing second-quarter scorecard. Coupang Inc recorded its largest operating loss in history following a regulatory fine, while major platforms including SSG.com, 11st and Lotte On all saw sales shrink.

Industry data released Wednesday showed second-quarter earnings varied sharply across major e-commerce players. The standout performer was Kurly, whose quarterly sales rose 27 percent year-on-year to 734.8 billion won ($519 million), while operating profit surged 1,991 percent to 27.4 billion won — setting a new quarterly record after the company posted its first-ever annual profit last year.

Kurly attributed the improvement to a higher share of commission-based revenue from third-party seller-fulfilled products. Its gross margin for the quarter rose 1.5 percentage points year-on-year to 35.3 percent.

Coupang Inc, the industry's top player, swung to its largest-ever operating loss, weighed down by a fine for a personal data breach and investment in its Taiwan business. The company posted an operating loss of $556 million for the second quarter, reversing from an operating profit of $149 million a year earlier. It was the second consecutive quarter of operating losses. The deficit surpassed the $515 million loss recorded in the second quarter of 2021, making it the deepest in the company's history.

A fine imposed by the Personal Information Protection Commission in June over a data leak, along with marketing costs to stem customer attrition, weighed heavily on expenses. Selling, general and administrative expenses rose 26 percent year-on-year to $3.05 billion. Total operating costs for the quarter reached $9.41 billion, exceeding revenue. Adjusted EBITDA fell 62 percent year-on-year to $163 million.

At the earnings conference call, Coupang Inc Chairman Kim Bom-seok said customer spending was at an all-time high. Consolidated revenue for the second quarter rose 4 percent year-on-year to $8.86 billion. Whether the company can rebuild customer trust in the second half and collect fire insurance proceeds remain key variables for the outlook.

SSG.com, the e-commerce arm of Shinsegae Group, posted second-quarter sales of 310.5 billion won, down 11.4 percent year-on-year, and an operating loss of 29.5 billion won, extending its streak of losses. The company said the wider quarter-on-quarter deficit partly reflected early execution of promotional spending tied to its SSG Seven Club membership program, with a portion of the full-year budget front-loaded into the first half — suggesting cost pressure should ease in the second half.

11st, operated by SK Square, saw sales fall 12 percent year-on-year to 97 billion won, while its operating loss widened slightly to 10.4 billion won, with both scale and profitability deteriorating. Lotte On, run by Lotte Shopping, narrowed its operating loss to 7.4 billion won, but sales edged down 1.5 percent to 26.2 billion won. Oasis Market posted a 96 percent year-on-year jump in operating profit to 6.9 billion won, though sales fell 8 percent to 137.1 billion won.

AliExpress Korea disclosed in an audit report released in July that sales for the 12 months through March fell 31.2 percent year-on-year to 110.4 billion won, swinging to an operating loss of 36.6 billion won and a net loss of 33.8 billion won.

"Only companies that can demonstrate a structurally profitable model — built on solid product competitiveness and logistics efficiency rather than simple scale expansion or a race to the bottom on price — will survive," a retail industry official said. "The growth of players that have successfully restructured their fundamentals will be the defining story to watch in e-commerce during the second half."

Coupang Inc's headquarters in Songpa-gu, Seoul [Herald DB]
Coupang Inc's headquarters in Songpa-gu, Seoul [Herald DB]

siuu@heraldcorp.com