Coupang manages to hold prices in check amid inflationary pressure

Coupang headquarters in Seoul [Photo by Park Hyung-ki]

The average price of essential items sold by e-commerce giant Coupang Corp. under the private brand fell 1.1 percent in the last year, a sharp contrast to how prices have gained at other online and offline retailers amid the high inflation.

An analysis by Maeil Business Newspaper on Thursday showed that the average price of 18 private label brand items of Coupang among 39 household staples whose monthly consumer prices are trackable declined 1.1 percent between the Februaries of last year and this year. The prices of 40 best-selling products of large food corporations in 18 categories, on the other hand, rose by an average of 9.5 percent during the same period.

The Korea National Council of Consumer Organizations tracks consumer prices of 39 household staples, usually of large corporate-made products topping the market share in each item category, based on the sales price at 300 retailers in Seoul and 120 retailers in 10 regions in Gyeonggi Province. It publishes consumer price data every month.

The council’s consumer price data showed that the price of products sold by large companies rose by double digits while those sold by Coupang under its own brand fell.

Dongwon F&B Co.’s seasoned seaweed product, which comes in a bundle of nine 5-gram packets, is priced at 3,990 won ($3), up by 11.1 percent from 3,589 won in February last year. Ottogi Corp.’s instant rice is priced at 1,489 won for 210 grams, up from 1,314 won. Kwangdong Pharmaceutical Co. sells 2-liter bottled water at 1,194 won, up 11.4 percent from 1,071 won. The price of a 1-liter carton of Namyang Dairy Products Co. also rose 10.6 percent to 3,234 won.

In contrast, the private label brands of Coupang saw most of the prices go down.

According to data from its price tracker app, the prices of nine private label products fell – tofu prices went down by more than 30 percent, instant rice 13.8 percent, and seaweed 12.8 percent. The prices of doenjang, or soybean paste, and orange juice, remained unchanged from a year ago. Six other items, including eggs and laundry detergents, saw prices increase but the hike was smaller than seen in the market.

Industry insiders note that Coupang was able to keep prices stable despite growing inflationary pressure as it reduced distribution costs with about 100 logistics centers across the country. It also made use of the automation technologies and large wholesale purchases.

Coupang also boasts an in-house brand strategy where the e-commerce platform handles all of the delivery, marketing, and logistics. Other manufacturers, on the other hand, only focus on production and product quality.

Nine out of 10 manufacturers of Coupang’s private label brand products are small- and mid-size companies and they have seen some 500 percent surge in their revenues between 2019 and 2021.

“Coupang’s private label brand strategy that focuses on volume and low price helps contain consumer price hikes,” said Jung Yeon-sung, a professor at Dankook University. “For small suppliers, a deal with Coupang is a great opportunity to remove business uncertainty.”