Correction: In the previous article, we reported that the Office of Legislation would decide the consequences of the illegality of Coupang’s Roket Delivery service by the end of August. However, the office said that it is currently deliberating the issue but the time is not fixed by the end of August.
SEOUL, Aug. 20 (Korea Bizwire) – The controversy surrounding Coupang, a social commerce company, is expected to be decided soon. The Office of Legislation will announce whether the company’s ‘Rocket Delivery’ service is illegal or not soon.
It was last year when Coupang launched its Rocket Delivery service, which guarantees product delivery within 24 hours of purchase, even on the holidays.
Customers were thrilled, and Coupang’s sales soared, leading the company to the front of the pack among online shopping sites. It also created a new trend among online distribution businesses that linked their survival to ‘delivery in 24 hours’.
However, the success also created controversy about the legality of the service. The focus is on whether Rocket Delivery is an onerous transport that is provided at a cost, or a service provided for consumers’ convenience with no strings attached.
The Integrated Logistic Association, a union of delivery services, is claiming that Rocket Delivery is a service that is provided at a cost, and that consumers are paying unknowingly since the costs are simply rolled into product costs. Their argument is supported by a precedent set by the Constitutional Court that free shuttle buses run by department stores were illegal, judging that the costs to run the shuttles were included in prices.
Coupang says that they are paying for the delivery service by cutting margins and making use of their own resources.
Coupang ran up 348.5 billion won in sales in 2014, for a 138 percent increase compared to the previous year. However, business losses reached 121.5 billion won. The company commented on the reason for the losses, saying, “We invested a huge amount in distribution and direct delivery services.”
As a strategy to strengthen their distribution and delivery system, Coupang invested over 150 billion won to improve their service. In March 2014, they started the Rocket Delivery service without outsourcing deliveries to other distribution companies.
The Integrated Logistic Association is anticipating that the Office of Legislation will decide that the Rocket Delivery service will also be deemed illegal for the same reasons as the department store shuttle bus case. On the other hand, Coupang is insisting that the Rocket Delivery service was started for the convenience of consumers, thus the burden of expenses will never be passed on to users.
Consumers are startled at the news, with many expressing hope that the company will be able to continue operating the ‘Rocket Delivery’ service.
By Francine Jung (email@example.com)