Executive Post Graduate Programme

2016-17
KAIST-IIMB International Immersion
Project (Term 3)
New Product Entry Strategy- Coupang
28th Sept 2016
Group no.8 Team Members:
Adesh Midha-1614004
Amit Jha- 1614009
Amritava Mitra - 1614010
Avimalya Ganguly- 1614018
Mohit Chouhan - 1614033
Rima Bose - 1614048
1

Objectives of the Project

Identify potential product categories
Potential growth opportunities in those categories.
Recommendation how to enter and grow in those categories.
Recommendation Rationale
Study similar international markets
Examine and compare product categories of other international ecommerce players
Evaluation basis
a. Leverage synergies- one day delivery, existing warehouses,
frequency of purchase
b. Profitability / Margins
c. Market sizing
d. Investment requirement
e. Future growth

CATEGORY 1- SPORTS & FITNESS ITEMS

MARKET SIZE

Revenue in the "Fitness" segment in South Korea amounts to US$114m in 2016.

It is expected to show an annual growth rate (CAGR 2016-2020) of 12.7% resulting in a
market volume of US$184m in 2020.
User penetration is at 11.4% in 2016 and is expected to hit 15.4% in 2020.
The average revenue per user (ARPU) currently amounts to US$22.84.

TARGET CUSTOMER

Businesses can look to target the growing number of single-person households

In eRetailing, a new style of shopping has emerged called showroom, where
customers go to physical shop to test product before coming online to purchase them

CHALLENGES
Alibaba and Gmart are already selling this category items.

ADVANTAGES
Major manufacturers of sport goods and fitness equipment are in South Korea, eg Motus,
Dynaforce Corp.

ADOPTION MATRIX Sports and Fitness

Equipment
Emerging

Growth

Body composition testing equipment

(e.g., hydrostatic, Bod Pod,
bioelectrical impedance, DEXA)

Flexibility/mobility equipment (e.g., foam

rollers, stretch trainers and myofascial
release devices)

Cross trainers and adaptive motion

trainers

Traditional functional fitness equipment and

accessories (medicine balls, stability balls,
BOSU, balance boards etc)
Treadmills, Elliptical trainers, Upright bicycles

Niche
Hot tubs or Jacuzzi, racquetball,
basketball, volleyball, and metabolism
testing equipment

Non-traditional functional training equipment

(e.g., Kettlebells, Indian Clubs, tires, ropes,
kegs, sandbags, sandbells, etc.) Matured
Recumbent Bicycles

CATEGORY 2- ELDERLY CARE

(TECHNICAL AIDS)
Market Value for Health Care equipment and
supplies : The Korean market for Health care equipment and supplies is
projected to grow to approx. $6367 million by 2018 i.e. by 40%
over the 2013

Segmentation of Health Care equipment and

supplies : Technical Aids :- Hearing aids and wheelchairs
Mass demand, can be ordered online and supplied through
Coupangs distribution system.

Market Sizing of Technical Aids: Assuming the same market share in 2018, the market size for
technical aids would be $917 million.

CATEGORY 2- ELDERLY CARE

(TECHNICAL AIDS)
Target Customer Base: People aged 65+ years who face the mobility and audibility
challenges.
Constitute to be approx. 13 % of current population 50 million
i.e. 6.5 million

Incumbents overseas: Amazon, Flipkart, Snapdeal and Paytm are already present in
the technical aids market.

Expected Margins:

The expected margins in South Korea for this market will have
to be estimated on the basis of data from category suppliers.
For a broad idea, big South Korean healthcare providers are
operating on good profit margins such as Johnson & Johnson @
20%, Medtronic @ 21%, Samsung @13 % etc.

South Korea Health

Care equipment and
supplies market
category
segmentation: - %
share by value, 2013

South Korea Health

Care equipment and
supplies market
value forecast: - $
million 2013-2018.

COUPANG 2ND HAND AND REAL

ESTATE
Overview

Multiple flea markets working in silos Large consolidation

opportunity
Large selection of goods varing profitability, large market size.
Coupang can leverage its technological capability and delivery
capability

Identified categories
a) Retail and Antiques (High volume low margin)
b) Motor vehicles and parts (Moderate volume moderate margin)
c) Real Estate (Low volume High Margin) including renting (Shift
from jeonse to renting)

Market Size (value)

Market Size

Total market size(Billion

is about
156.5 Billion USD
Segment
USD)
Used Cars
Used motor vehicle
part
Used goods retail
Real estate
Total

5.7
0.3
0.5
150.0
156.5

COUPANG 2ND HAND AND REAL

ESTATE
Target Customer Base

The target customers for 2nd hand market are middle and low-income segments.
The total customers will be approximately 0.3 Million

Overseas development and success stories

China - Alibaba launched a mobile app for used-goods trading called Xianyu (Idle
Fish) in June 2014, investment of 15 mn USD.
India OLX.in- founded in 2006, current valuation - ~1.5 Billion USD.
India Quikr.com Founded in 2008, current valuation - ~3.5 Billon USD.
India Cardekho.com - Founded in 2008, current valuation - ~0.3 Billon USD.

Revenue streams
Advertising revenues
Revenue per transaction.
Premium charges for delivery of goods

Challenges
Initial effort for consolidation and onboarding of sellers is significant.

COUPANG 2ND HAND AND REAL ESTATE

APPENDIX
List 1: Sample Facebook pages
https://www.facebook.com/korearent/
https://www.facebook.com/groups/326851297523848/
https://www.facebook.com/Korean-USED-CARS-1871843
869706104/
Table a: Market
categories
Segment

size

of

individual

Market Size (Billion USD)

Used Cars

5.7

Used motor vehicle part

0.3

Used goods retail

0.5

Real estate

150.0

Total

156.5

COUPANG 2ND HAND AND REAL ESTATE

- APPENDIX
Table b: Market Size

Population %
Estimated
population #
Broadband
penetration %

High income

Middle Income

Low income

Total

18.5%

69.7%

11.8%

9.2907

35.00334

5.92596

50.22

100.0%

84.0%

29.6%

9.29

29.40

1.75

40.45

Estimated
Broadband users
#

Percentage
market
Capture

Used Cars
Used motor
vehicle part
Used goods retail

Real estate
Total user base #

Market
Size

Percentage
market
Capture

Market
Size

Percentage
market
Capture

Market
Size

0%

0.00

20%

0.06

30%

0.01

0.06

0%

0.00

10%

0.03

20%

0.00

0.03

0%

0.00

20%

0.06

40%

0.01

0.07

20%

0.02

40%

0.12

20%

0.00

0.14

0.02

0.26

0.02

0.30

As per 2013 data by Hyundai research institute, high, middle and low-income segment percentages are 18.5, 69.7, and
11.8 percentage respectively.
Korea has 84% broadband penetration; Assuming 100 and 84% broadband penetration in high and middle-income
segments, the low-income group will have a 29.6% broadband penetration.

COUPANG 2ND HAND AND REAL ESTATE APPENDIX

Table c : estimated margins

Segment

Margins

Used Cars

20%

Used motor vehicle parts

10%

Used goods retail

9%

Real estate

5%

COUPANG 2ND HAND AND REAL ESTATE REFERENCES

https://www.statista.com/forecasts/424822/south-korea-used-goods-retail-annual-salesforecast-ksic-g4786
https://www.statista.com/forecasts/424779/south-korea-used-motor-vehicle-part-retail-a
nnual-sales-forecast-ksic-g4522
https://www.statista.com/forecasts/424785/south-korea-used-motor-vehicle-retail-annua
l-sales-forecast-ksic-g4512
http://www.economist.com/news/finance-and-economics/21596566-landlords-are-havingditch-century-old-rental-system-lumping-it
http://www.scmp.com/tech/e-commerce/article/1931469/alibaba-spend-us15-million-digi
tal-flea-market-china-looks-second
http://www.koreafocus.or.kr/design2/layout/content_print.asp?group_id=105791http://
www.koreafocus.or.kr/design2/layout/content_print.asp?group_id=105791
http://www.businesstoday.in/magazine/cover-story/e-commerce-online-classified-marketolx-india-vs-quickr/story/218863.html
http://articles.economictimes.indiatimes.com/2015-01-28/news/58547167_1_car-dekho
-zomato-quikr

http://www.cnbc.com/2014/08/22/used-car-market-showing-no-signs-of-slowdown.html
http://www.autodealermonthly.com/channel/dps-office/article/story/2012/06/service-and-p
arts-profitability.aspx

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/margin.html
http://www.forbes.com/sites/sageworks/2011/08/30/used-sweaters-more-profitable-th
an-you-might-expect/#f5474e57a6a7

CATEGORY 4- GIFT CARDS

Korean Gifts Market:

Gift giving and taking form a significant part in maintaining good relationships
in South Korea.
Over USD 1000 spending on gifts per person per year in the year 2015.
Increasing inclination towards buying gifts through e-commerce channels
rather than hyper-marts, department stores or other local stores.

Special days and occasions on which gifts are exchanged

extensively

CATEGORY 4- GIFT CARDS

Gifts card segment would provide Coupangs consumers the option to

purchase and gift a selected card to the desired recipient, who can then use
this card to buy products from Coupang.

Variants of the Gifts Card:

Normal Gifts Card
pre-filled with the specified amount of money
the card price would be the same as the monetary value attached

Personalized Gifts Card

Personalize the card through uploading pictures or messages

Personalized premium silver/gold metal Gifts Card

piece of art or craft in itself along with being filled with Coupangs credit
greatly valued and preserved by the recipient

Personalized exclusive or limited edition Gifts card

premium, highly priced and completely customized
containing very high Coupangs credit inside
presented on very special occasion to someone very special, e.g. to a daughter
on her wedding

CATEGORY 4- GIFT CARDS

Opportunities

leverage the existing Korean trend of gifts exchange and

complement it with Coupangs high customer loyalty and superior
door-step rocket delivery system.
increase revenues both ways- through gift card sales and through
redemption of the gift card credit.

Estimated Profit per year

USD 2 million

Challenges

requires special attention and care to target and position the product
to the desired customer segment.
the software system upgradation to ascertain error free gift cards
purchase and redemption.

Estimated Profit per year

1

Total Korean population in 2015

Population using ecommerce

Regular consumer of Coupang

4
5

Gift card consumer volume of Coupang

Average spending on gifts per person
p.a.

% spending on gifts card by (4)

10% of
(5)

Total spending on gifts card by (4)

(4)*(6)

Average profit margin on gifts card

Average profit margin on product sale
through gifts card

10%

5%

Total profit margin per year

9
10

50% of
(1)
10% of
(2)
5% of
(3)

50mn
25mn
2.5mn
125000
USD

1000

USD

100

USD

USD

12.5mn

2mn

CATEGORY 5- INDUSTRIAL SUPPLIES

Opportunities

40 percent of electrical supply traders lack e-commerce capabilities.

Market grew @6.8% (CAGR) from 2010 to reach the value of $9518
million in 2013.
Estimated market size of the 4 categories of industrial supplies is 1
lakh crore South Korean Won by 2020.

Challenges

Low margins of 5%.

Target Customer Base

Small scale Industry owners and budding entrepreneurs.

People aged 25-40 years who need hand tools and similar equipment
for homely repairs (65 % of current population 50 million)

Incumbent players overseas in this sector

Amazon, Snapdeal and Paytm

CATEGORY 5- INDUSTRIAL SUPPLIES

ITEM SUB CATEGORIES

POWER TOOLS

INDUSTRIAL SAFETY
EQUIPMENT

HAND TOOLS

ELETRICAL AND
INSTRUMENTATION
ITEMS

POWER DRILLS

SAFETY SHOES

SPANNER SETS

CIRCUIT BREAKERS

POWER SAWS

GLOVES

SCREWDRIVERS

SOLAR POWER

SOLDERING AND
WELDING

EYE PROTECTION

CUTTING TOOLS

PUMPS AND MOTORS

HEAT GUNS

WORK WEAR

HAMMERING TOOLS

WIRES AND CABLES

HEARING PROTECTION

GRINDING TOOLS

FIRE PROTECTION

FALL PROTECTION

ROAD SAFETY

CATEGORY-6 PRESCRIPTION LENSES AND

SUNGLASSES
Key Drivers
As the numbers of South Korean people aged over 65 are
increasing, readymade reading glasses and progressive lenses
are registering positive sales growth

Key Risks
online purchase of contact lenses and spectacle lenses was
banned in South
Sunglasses and spectacle frames are available through internet
retailing, but since consumers prefer to try them on before
purchasing, the growth rates being recorded in these categories
are not as high as in other consumer goods markets such as
apparel and footwear.
However, the way lens kart has solved this trying out issue with
virtual technology in India, there can be a possible opportunity
for Coupang to try out the same in Korea