Coupang warehouse fire set to inflict massive losses amid mounting regulatory woes

Coupang Inc is bracing for massive losses as a fire at its Incheon logistics center enters its third day. The blaze compounds an already dire financial picture: on top of a hefty government fine stemming from last year's personal data breach, additional regulatory penalties are expected, and the fire damage threatens to send the company's losses snowballing this year. Consumer and seller compensation claims are also anticipated in the fire's wake.

Industry sources said Monday that the financial toll from the fire at Coupang's Logistics Center 32 in Seoknam-dong, Seohaegu, Incheon, could run into the hundreds of billions of won. The eight-story facility has a total floor area of 299,000 square meters — equivalent to 42 soccer fields — making it one of the three largest Coupang warehouses in the country.

The Incheon center is 2.3 times larger than the Deokpyeong logistics center in Icheon, which burned to the ground in June 2021. That fire cost Coupang $296 million — about 340 billion won at the exchange rate prevailing at the time — comprising $158 million in inventory losses, $127 million in real estate and equipment losses, and $11 million in other losses.

The fact that the Incheon facility primarily stores rocket-delivery products such as home appliances — purchased directly by Coupang — adds to the company's exposure. The center also houses a large volume of high-value logistics equipment. Industry observers estimate that losses could range from tens of billions to hundreds of billions of won, depending on how many floors are affected.

The fire comes at the worst possible time for Coupang, which is already reeling from a record fine over a personal data leak. The Personal Information Protection Commission last month imposed a penalty of 624.6 billion won ($449 million) on the company — the largest data-privacy fine ever levied in South Korea — effectively wiping out the 679 billion won in operating profit Coupang earned last year.

The National Tax Service recently completed an unscheduled tax audit of Coupang and notified the company of a 300 billion won back-tax bill. On top of that, a financial penalty from the Fair Trade Commission related to Coupang Eats is expected in the third quarter. Coupang Eats and Baemin are both under investigation on charges of forcing partner restaurants to offer their lowest prices exclusively on their platforms.

Should the government fines and fire-related losses all be recognized at once, Coupang faces the prospect of staggering losses this year — with some in the industry warning they could reach the 1 trillion won range. The company had already swung to a loss in the first quarter, posting an operating loss of 354.5 billion won — its first deficit in seven quarters.

Coupang is working to prevent the fire from cascading into widespread delivery disruptions. Inventory from the Incheon center has been redistributed to other logistics facilities in the greater Seoul area. For products that cannot be delivered due to the fire, the company is reportedly canceling orders and compensating customers with Coupang Cash.

Sellers are also watching the fallout closely. There are concerns that products stored under the "Rocket Growth" program — in which sellers warehouse goods at Coupang facilities for rocket delivery — may have been damaged. On one seller community forum, users voiced alarm: "Even just being unable to sell because there's no stock is a huge loss," one wrote, while another warned, "Being out of stock for several days will hurt our sales rankings."

Meanwhile, Jeong Jong-cheol, chief executive of Coupang Fulfillment Services, which operates the Incheon center, issued a statement Saturday when the fire broke out, offering a sincere apology for causing concern to so many people. "We will make firefighter safety our top priority, actively support the firefighting operations under way at the scene, and fully cooperate with the relevant authorities' investigation," Jeong said. "We also plan to actively provide support to local residents who are experiencing difficulties as a result of this fire."