South Korea's online shopping malls are expected to post a combined 1 trillion won (US$915 million) operating loss this year as they offer excessive discounts in a competition with rivals to dominate the growing market, industry sources said Wednesday.
The rising losses over the past few years come amid growing sales by the online retailers, which have been trying to win over consumers in the new market despite falling profitability on a short-term basis, the sources said.
Coupang Inc. is expected to suffer about 500 billion won in operating losses this year, slightly better than its losses of 560 billion won last year and 547 billion won the previous year. Coupang's sales jumped 64 percent on-year to 1.9 trillion won last year.
"We expect sales to rise to 3 trillion won this year, more than 1 trillion won up from last year," a Coupang official said. "Losses will drop greatly this year compared to last year."
11st, run by SK Planet Co., is forecast to report about 100 billion won in losses this year, an improvement on a deficit of 180 billion won last year.
Ticket Monster Inc., or TMON, will also likely suffer 100 billion won in losses, and WeMakePrice Inc. will accrue 50 billion won in losses this year.
Ebay Korea is the only exception, with an expected operating profit this year of 70 billion won.
The operator of G Market and Auction posted 67 billion won in operating income last year.
"We are witnessing a bizarre phenomenon in which online shopping companies are suffering from massive losses in a cutthroat competition to dominate the ever-growing market in advance," an industry source said. "I don't think this kind of structure is sustainable." (Yonhap)