E-commerce Industry Shifts Direction with Reopening... "Must Pay Attention to Large Supermarkets"

Yuanta Securities Report

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[Asia Economy Reporter Myung-hwan Lee] With the reopening (resumption of economic activities), securities firms have forecasted that e-commerce companies will shift their focus from growth to profitability. Along with this, advice has been given to pay attention to stocks related to large discount stores.

Yuanta Securities analyzed on the 19th, "The dawn of the reopening era means that the explosive growth period of e-commerce operators has passed." They explained that due to liquidity contraction caused by high inflation, e-commerce operators, who still have poor profitability, may find it difficult to raise additional funds. Accordingly, they predicted that e-commerce operators' strategies will inevitably shift from growth-oriented to profitability improvement. Securing profitability is the primary task for e-commerce operators.

Coupang was presented as a representative example. Coupang revealed its intention to improve profitability for the first time through its Q4 earnings announcement last year. It was noted that Coupang achieved an early turnaround to positive EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) in its core business units through its Q1 results. Yuanta Securities diagnosed that Coupang's reduction in price promotions led to an improvement in GPM (Gross Profit Margin). The price increase of Coupang's paid membership, 'Wow Membership,' was also seen as a strategic move for profitability improvement.

Due to this directional shift of e-commerce operators, it is advised to pay attention to large discount store operators who were in direct competition in the grocery shopping market. Among them, attention should be focused on Lotte Shopping and E-Mart, which are also engaged in e-commerce businesses. It was explained that these two companies are also shifting their business focus toward profitability improvement.

Jin-hyup Lee, a researcher at Yuanta Securities, stated, "Large discount store operators have naturally suffered GPM erosion due to direct price competition with e-commerce operators. As the competitive environment in the market eases, the turnaround in the GPM of discount stores, which had been continuously declining, will begin in earnest."

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