South Korea's largest e-commerce company, Coupang, recently gained attention by selecting top star Kim Go-eun as its advertising model. This marks the first time in 12 years that Coupang has featured a celebrity as an advertising model since Jeon Ji-hyun in 2013. The campaign aims to promote the premium cosmetics platform "R.LUX," launched last October, and industry analysts suggest that Coupang is attempting a premium strategy to increase its profit margins.
According to the retail industry on the 17th, Coupang has been airing advertisements for R.LUX featuring actress Kim Go-eun since earlier this month through outdoor ads in key commercial areas of Seoul and online. The slogan "New rule. New luxury" emphasizes the message that "luxury goods can also be purchased at Coupang."
Coupang has risen to the top of the industry with a strategy of rapidly delivering practical and cost-effective products through direct purchases. Known for being a one-stop shop for everything from diapers and bottled water to groceries, furniture, and electronics, Coupang has not been able to achieve significant results in the fashion and beauty sectors compared to vertical shopping malls like Musinsa and Olive Young.
The reason is that comprehensive malls like Coupang face intense competition for the lowest prices and frequent issues with counterfeit and copy products. However, fashion and beauty products are considered a crucial product category because they have larger profit margins compared to essential goods and can attract the trend-sensitive MZ generation (Millennials + Generation Z, born between 1980 and 2010).
Coupang is particularly targeting "department store cosmetics" because mid-range K-beauty products made up of domestic indie brands are already dominated by Olive Young and Daiso, and luxury products have higher profit margins.
R.LUX is a luxury beauty vertical service that handles what are known as department store cosmetics, including Jo Malone, Laura Mercier, Estée Lauder, and Sulwhasoo. It is accessible via the Coupang app, but a separate application with an elegant design has been developed to enhance user experience for female consumers, who are the primary target.
In addition, a dramatic advertisement featuring Kim Go-eun aims to capture attention. In the ad, Kim Go-eun expresses the modern luxury that R.LUX aspires to with an urban image of a short haircut, departing from her previous innocent image. R.LUX has elevated its brand image by referring to Kim Go-eun not just as an advertising model but as an ambassador. Kim Go-eun is recognized as a highly influential figure in the fashion and beauty industry, having served as a Chanel ambassador.
Previously, the grocery shopping platform Kurly also ventured into the beauty market by selecting Blackpink's Jennie as its model to establish its presence. Launched in November 2022, Beauty Kurly surpassed 300 billion won in sales in 2023 and achieved sales exceeding 500 billion won last year. The growth rate in beauty products last year was recorded at 40%. The fashion vertical platform Musinsa also strengthened its beauty product line last year by appointing Karina from the girl group aespa as its ambassador.
According to industry sources, Coupang's sales are estimated to have surpassed 40 trillion won last year. This comes just one year after it broke the 30 trillion won mark in 2023. However, despite the dramatic revenue growth, its operating profit margin remains low. Coupang's operating profit margin for the first three quarters of last year was 0.5%, falling short of Emart (0.6%) and Lotte Shopping (3%).
While increasing its scale through selling cheaply, Coupang has seen its expense burden grow as it enhances member benefits like discount coupons and free returns and deliveries. Analysts suggest that the premium strategy to increase the average transaction amount is essential for boosting profit margins.
Coupang's recently launched "Premium Fresh" seems to be driven by this same context. Premium Fresh, which is an upgraded version of its existing fresh food service, "Rocket Fresh," delivers top-tier fresh products comparable to those found in department store food halls via rocket delivery. Currently starting with fruits, the service plans to expand to include 12 types of fresh products, including meats and seafood. An industry source remarked, "I understand that it targets consumers who shop at department store food halls, similar to modern food halls," adding that it reflects the recent trend of retailers strengthening their fresh food offerings.
Fresh food is considered a market that Coupang has not yet captured, alongside fashion and beauty. According to industry sources, the online penetration rate for essential goods and industrial products is about 50%, while the online penetration rate for fresh food currently remains in the 20% range. For this reason, retail companies including Lotte and Shinsegae are also strengthening their online fresh food sales. Next month, Lotte Shopping plans to launch a grocery app called "Lotte Mart Zeta," equipped with artificial intelligence (AI) technology from the British online retail platform Ocado.