Coupang announced a “Rocket Partnership Program” for multiple 3rd parties. Coupang disrupts the e-commerce delivery called “Rocket Delivery” with its secure internal fulfillment and logistic system for direct selling products. Before this program, Coupang could provide the same benefits to 3rd party sellers if they sold directly to Coupang. So then, why did Coupang announce this program?
1. What is the difference between Rocket Delivery and Rocket Partnership?
The Rocket Delivery and the new Rocket Partnership seem to have resembled. For example, if you read the press release from Coupang, it is stated that Coupang will take charge of the product’s warehousing, promotion, and delivery. However, according to the article from Byline Network, the program was different.
| Rocket Partnership | Rocket Delivery | |
| Purchase Methodology | Account Payable | Direct Purchase |
| Responsibility on Inventory | 3rd Party Seller | Coupang |
| Program Participation | Subscription | 1st Screening by Coupang. |
| Product Sales Data | Being provided to 3rd Party Seller | Not provided to 3rd Party Seller |
| Delivery Cost | Free | Free |
We could read that Coupang is trying to save costs and improve the operation’s efficiency. As the responsibility for inventory is mapped with 3rd party sellers, the 3rd party sellers will not ship to Coupang logistic center at any time. Furthermore, the 3rd party sellers decide the price, not Coupang. Therefore, the internal pricing team can save time. And there is a significant benefit, advertising.
2. Promoting its new business – Advertising
It is well known that Coupang started the advertising business with Coupang Media Group. As Amazon is the second-largest online advertising player, Coupang tries to resemble the business model to compensate for the legacy business’s deficit.
Promotion is the most crucial revenue model for food delivery platforms. Of course, Coupang will give them free advertisements for market expansion and make the promotion as the 3rd party seller’s habit. Furthermore, we shall position this as the primary revenue generator in Coupang. The goal is to reduce the current deficit and make it a plus with new business models by resembling the Amazon model. One thing remains here.
3. It is all about fulfillment and regulation.
Amazon generated 22% of its revenue from 3rd party seller-related products or services. If Coupang is trying to be like Amazon, a business model like Fulfilment by Amazon is needed. Coupang is now delivering its products for free to customers with private logistic vehicles. They can do the fulfillment business immediately with commercial logistic trucks and the license.
However, due to the Act on Truck Transportation Business, it is illegal for an e-commerce player to deliver something as paid for without a license. The subsidiary company of Coupang, Coupang Logistics Service, received the commercial logistics license in September 2018. One year later, they returned the support voluntarily because the ratio of 3rd party sellers was below the government’s recommendation.
With this Rocket Partnership Program, the company can again drive Fulfillment by Coupang. As a result, the ratio of 3rd party deliverables will go up.
4. Lastly, Naver is becoming a real threat to Coupang.
The pickool team believes that a nation’s total spending is just growing based on the potential growth rate of a particular country. Therefore, the total expenditure in South Korea will not change, but buying from where and which channel will change.
According to WiseApp, the total transaction amount of Naver Shopping was KRW 29.9TR (USD 25B), and Coupang was KRW 17.1TR(USD 14B). The nation’s largest web portal service provider is expanding its empire to eCommerce with an online e-commerce marketplace.
The transaction via the online marketplace grew 56% compared to the same quarter last year. Furthermore, Naver announced this April that CJ Logistics would start within 24 hours delivery for the LG cosmetic product only. As a result, most Korean media expected the range of products to expand and churn many Coupang Rocket Delivery customers.
Coupang is now generating revenue from its direct selling of 80% and 20% from 3rd party sellers. To save their pie and make expansion, it was the beginning of; Rocket Partnership Program.
Please also read.
Thuan Pham, ex-CTO of Uber now is CTO of Coupang.
Coupang: An Attempt to enter the Chinese market
Coupang’s New Business: OTT, Used Cars, Gaming, and Mobility.
A Stunning eCommerce War in Korea: Naver vs. Coupang.
Coupang starts to prepare its live-streaming commerce business.
Coupang vs. Amazon: Incredibly, Amazon-like eCommerce player is now a dominant player.
