The second-quarter results Kurly released on the 12th were dazzling. Revenue was 734.8 billion won and operating profit was 27.4 billion won, the largest ever on a quarterly operating profit basis. The SG&A ratio fell 2 percentage points to 31.5% from 33.5% a year earlier. Both labor costs and advertising expenses decreased as a share of revenue.
There was just one exception: packaging costs. They rose 30% to 17.5 billion won from 13.5 billion won in the second quarter last year. That is higher than the growth rate in revenue (27%). The company said this was "because of increased use of packaging sub-materials due to the early start of the summer season."
Kurly said on the 13th that it runs about 100 types of packaging methods. They are split by season and change with the day's temperature, and that day's method is posted as a guide in front of the packing station every day. It includes how to separate and pack refrigerated, frozen, and room-temperature items, and where to place ice packs and dry ice. Dry ice, which is made from by-products of petrochemical processes and is affected by naphtha supply, has been hard to secure across the industry; Kurly secured volume through an affiliate but could not increase it indefinitely, so it even resorted to the desperate measure of adding one more layer of foil packaging.
Even so, complaints like "everything arrived melted" have continued on social media (SNS) recently. Management held ad-hoc meetings to respond, referring to customer complaint posts, but the company lamented that "we couldn't beat the weather."
For dawn delivery, nighttime is more of a problem than daytime. Orders placed at 11 p.m. are packed at the fulfillment center, ride in trucks through the night, and are placed at the door at 7 a.m. This summer, the nights did not cool. In Seoul, a heat wave night (overnight low of at least 25 degrees Celsius) continued for 17 straight days from July 22 to Aug. 7. During this period, more boxes failed to hold up with dry ice, concentrating consumer complaints.
Across the industry, efforts to preserve freshness in the scorching heat were similar. Coupang increased dry ice and ice pack input by 10%–20% from usual, SSG.com more than doubled cooling materials for the summer season and cut the operating period for vegetables by up to 50%. Oasis Market used ice packs and frozen bottled water together as cooling materials and kept a double-packaging principle for frozen products.
The heat wave bill is expected to arrive in earnest in the third quarter. An industry official said, "Given the record heat from June to August, third-quarter packaging costs are likely to increase considerably." The longer the heat lasts, the more online transactions of fresh food rise, but the expense of transporting that volume without thawing also grows. As more consumers entrust summer grocery shopping to online, maintaining delivery quality is becoming a new task for the industry.