Coupang and Private Label Dilemmas

The Difficulty of Playing to Win with Private Brands

South Korea’s Coupang is in the news again today, this time for a story on its relations with the South Korean government.

For those who aren’t aware, Coupang is essentially the Korean equivalent of Amazon — a massive online retailer selling everything from groceries to books. To say that it’s a major player is an understatement in some regards, since it is the dominant player and essentially untouched by Amazon. While Amazon has made inroads into Japan successfully, such a parallel market entry in Korea has not materialized for a number of reasons.

However, that’s changing lately. Chinese entrants like Temu have shown some strategic success in appealing to an increasingly cost-conscious populace squeezed by inflation and other increases in cost of living. While Alibaba brands have to traverse the Atlantic to ship to American customers, they are much closer to Korean markets and can easily reach customers there without such long shipping times. Coupang has reason to treat these new competitors as serious threats in a way that Amazon isn’t.

As such, it’s somewhat puzzling that the Korean government decided to institute a massive fine of $115 million on Coupang owing to the latter’s private label strategy. At this crucial time for Coupang to repel new entrants from abroad, the domestic government sees fit to impose the largest fine ever (!) imposed on a single retailer. Like I said, the timing is curious.

I like Coupang and use their site often. In South Korea, their grocery delivery service is speedy, and the selection can be pretty good. Their private label experience is, for me, hit or miss. The Coupang private label cheese leaves much to be desired, but they are great for other items like household consumables. At the same time, they aren’t quite in the same league as say, Costco’s Kirkland Signature private label.

It is unclear if Coupang is aware of the struggles of its independent retailers and those who list products on the site. With Chinese entrants carving up the low-cost segments of the market, they may be feeling the pressure in a way that Coupang’s private labels are not. It will be interesting to see if this fine loosens things up for the companies who rely on Coupang and to what extent this affects their market share.