umables delivery service outside of its domestic market are too risky and too much of a long-term sinkhole for cash when it is coming up against established players with a big head start. Meanwhile, Naver Shopping, which EcomEye has reported runs second to Coupang in Korea in terms of monthly shopper visits to its site or app, has taken a different approach to overseas expansion. It has muscled up its e-commerce offering and gained an important beachhead in the US market with its recent purchase of California-based refashion platform Poshmark. Even so, Naver, like Coupang, remains focused on actions where speed is of the essence in Korea itself, and is taking aggressive steps to mop up smaller players in the highly fragmented market. Naver, despite easily being Korea’s number one search engine, has long played second fiddle to Coupang in e-commerce, partly because of its inferior infrastructure and logistics capabilities. Coupang launched as a marketplace in 2010 and has made it a priority over the years to invest heavily in infrastructure and technology to enable its unequalled rapid delivery service. Most Koreans live within 10 kilometres of a Coupang distribution centre. The company is particularly fond of robots to increase the efficiency of its logistics system, and CEO Bom Kim vows to use more. In an attempt to counter Coupang’s technological advantage, Naver announced in January the launch of a new delivery concept called Naver Guaranteed Delivery Service, that would sharpen up delivery times and compensate customers who didn’t get their orders within the specified time. Naver is also lobbing pocket-sized logistics centres into about 3,000 petrol stations across the country operated by SK Energy. It refers to these logistics centres as “micro fulfilment” centres that will get products closer to customers and speed up delivery. Coupang in front Naver has a long way to go to catch up with Coupang in terms of revenue. In its fourth-quarter results, announced at the end of February, Coupang reported a second consecutive quarterly net profit, of US$102 million ($152 million), with year-over-year revenue growth of 5 per cent (21 per cent on a constant currency basis). For the whole year, revenues increased by almost 12 per cent (26 per cent on a constant currency basis). Rocket Wow, Coupang’s subscription service that mimics Amazon Prime, boasted 11 million members at the end of last year, almost double the number at the end of 2020. Wow is the jewel in Coupang’s crown, in the sense that it enables the company to generate a stable income stream from groceries and other consumables, and the cross-shopping opportunities they provide. This is unlike other e-commerce companies in the region, which focus on discretionary items that are more prone to volatility depending on the economic environment, which looks decidedly rocky in the near term at least. Coupang’s revenues for the whole year 2022 breached $20 billion for the first time, reaching $20.6 billion, and its net loss for the year narrowed to $92 million. The company is also reporting that each new customer cohort is starting to spend at a higher level and spending is growing at a faster pace than in cohorts that have gone before. Still, total revenue growth in the fourth quarter suggested that the brakes are going on.  Investors don’t like the squealing sound of brakes on a tech company’s revenue growth and that is keeping a lid firmly on Coupang’s stock price, which at the close on 16 March was trading at $12.91 on the NYSE, down more than 13 per cent year to date, 29 per cent on the year and 73 per cent from its record high. Naver, which is listed on the Korean stock exchange, reported US$6.3 billion ($9.4 billion) in revenue in 2022 and a net profit of $506 million. Its share price is also languishing more than 50 per cent below its high in July 2021.  The need to mop up the small fry With Coupang’s prospects for overseas expansion looking shakier, and Naver still playing catch-up in logistics, both companies are anxious to mop up smaller, nimble competitors in the fragmented Korean market. There is no time to lose. Korea has an ageing population with one of the lowest fertility rates on the planet. Moreover, internet and mobile phone adoption are already high so there is no low-hanging fruit in terms of the population remaining to connect.  Getting more customers is becoming harder: Coupang had 18.1 million active customers in the fourth quarter of 2022, which was an increase of only about 100,000 on the previous quarter. (Active customer is defined as anyone who placed an order during the quarter.) So consolidating the market by eliminating the smaller fry is imperative for growth.  Outlook Bom and his counterparts at other Korean e-commerce companies have been increasingly sounding the alarm about macro headwinds that are beyond their control and could derail growth in 2023. A more confronting problem in the long-run, however, is not macroeconomic but demographic: The total pie isn’t expanding fast enough, which makes elimination of local competitors and overseas expansion so compelling. But Coupang is finding out that doing argy-bargy on others’ turf in the consumables delivery business may not be viable, no matter how good its logistical capabilities.  This is where Naver may have an advantage: using its resources to acquire dominant players in niche markets. Poshmark in the resale segment, for example, will give it access to the US market and at the same time potentially expand its reach among fashionistas in Asia itself. The outlook for their smaller competitors in Korea is bleaker. This is a ‘red ocean’ industry, and the sharks are circling.