Coupang to spend $308 mil. to expand distribution network

Asia's Tech News Daily

Coupang to spend $308 mil. to expand distribution network

Coupang’s distribution center in Bucheon, Gyeonggi Province / Yonhap

By Kim Jae-heun

Coupang, Korea’s largest online retailer, borrowed $308 million from a bank by putting up real estate holdings as collateral to expand its distribution network, according to the Securities and Exchange Commission on Wednesday.

Also known as “fulfillment centers,” the distribution warehouses play a key role in delivering online orders to customers across the country.

Coupang confirmed that it obtained the loan, noting that it is part of a long-term investment to enhance its share of the e-commerce market.

The online retailer pledged to invest 1 trillion won ($842.8 million) to expand logistics facilities nationwide, following its listing on the New York Stock Exchange in March.

The company did not disclose any further details regarding the loan, including the name of the bank that offered the money.

The Securities and Exchange Commission said that Coupang borrowed $169 million in August and another $139 million in October.

For each case, $167 million worth of land and $203 million worth of buildings were offered as collateral.

Coupang is expected to spend the borrowed money to construct additional distribution centers in Busan, North Jeolla Province, South Gyeongsang Province and North Chungcheong Province.

Apart from products sold by individual sellers on its open market platform, Coupang purchases most of its items directly from wholesalers. It manages the whole process, from product warehousing to classification, delivery and return, through the fulfillment centers.

Currently, Coupang has just over 100 facilities in 30 cities here, which the company believes is not enough. It has been investing hundreds millions of dollars every year to expand its logistics centers in hub cities to deliver goods at cheaper prices than its competitors.

The retailer set an ultimate goal of having 70 percent of the country’s population live within 7 miles of its warehouses. This goal will allow everyone living in Korea to receive their orders on time, even those living in remote regions far away from cities.

However, there are concerns over Coupang’s accumulating losses. Coupang has not made a profit for over a decade since its establishment in 2010. Meanwhile, its deficit totals 4.8 trillion won.

Previously, Coupang secured investments from its largest shareholder SoftBank, backed by Chairman Masayoshi Son. Through the Japanese conglomerate’s venture capital SoftBank Vision Fund, Coupang secured $3 billion (3.5 trillion won) to expand its retail business.

However, Son retrieved 2 trillion won in September, after Coupang’s safeguard deposit period ended. The system prevents investors from taking out their money for a certain period of time, after a firm goes public in the United States.

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