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that I spoke to yesterday
that I had met for the first time at David's conference.
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Welcome back to business breakdowns.
Today we are covering the South Korean
e-commerce giant coupon.
If we ran through the taxonomy of investor interests,
this coupon conversation checks many boxes on that list.
We have a founder owned and operated business.
We have a business that went through a massive pivot,
years into existence.
We have a business that's replicating
the Amazon model to success.
And we have a business with healthy debates
on the TAM and financial trajectory going forward.
Our guest today is Drew Cohen from Speedwell Research.
We want business breakdowns to be the most efficient way
for you to learn about a company.
So we pack that information as densely as possible
into about an hour each episode.
But if you are itching for more on coupon,
check out Drew's full report at speedwellresearch.com.
You can find a link in the show notes.
Now onto this episode and the many, many case studies
that exist within coupon.
All right, Drew, welcome back.
Third time guest, you joined the exclusive club.
We started with Restoration Hardware,
floor into core as the two initial episodes.
We are going abroad here to show the truly global nature
of Speedwell Research.
Let's introduce coupon to the audience.
We were talking about this before we hit record
that it's an increasingly popular name,
but perhaps there's quite a few listeners
that aren't familiar with coupon and the story.
So maybe you could just start with a thumbnail sketch
of the business today, how you would describe it
to give listeners a sense of what this looks like.
Yeah, well, thank you for having me on.
And I have this piece about how you need to watch the metaphors
when you're comparing companies to other companies.
But with that to do, let's just get right into it.
Coupang is basically the Amazon of South Korea.
Very similar first party logistics operation.
They have about half of all Korea currently signed up
for their service.
They are the number one e-commerce player there,
25 billion in revenues.
They've grown at a 45% keger since 2018.
They now have also their own membership program,
like wow, of the 22 million Korean households
there are 14 million people are subscribed
to rocket wow membership.
And so that's just them in a nutshell.
They are profitable on both an EBIT basis
as well as a free cash flow positive.
And don't leave it there.
It's a good overview.
And I think we will discuss throughout the conversation
the similarities to Amazon, maybe the differences
from Amazon.
But like Amazon, there's a great founder story here,
which I appreciated reading about.
And maybe you can bring us back.
I think in terms of the culture today,
there's this real love and affinity for founders that
continue to own and operate their businesses.
That seems like the case here at Coupang.
Bring us back to the early days.
Absolutely.
So Bumkin was born in South Korea.
Then he moved to the US when he was pretty young.
He's always had this entrepreneurial itch.
He started a magazine of all things.
It was called Current Magazine.
He ends up selling that.
We know it's an undergrad at Harvard.
Later on, he goes to BCG.
Consulting's not really his thing.
And so he ends up starting another magazine.
This time it's called 02138 after the zip code of Harvard.
And he ends up also selling that one as well,
right around the midst of the financial crisis.
That one didn't go as successful,
but the investors recouped their money.
And at this time, he's going out to get a Harvard MBA.
He's looking for his next opportunity, the next big thing.
At the end of the first year of his MBA, he drops out.
And he drops out because he wants
to pursue this new and novel business model
that is all the fat and Silicon Valley Groupon.
And if you remember from Groupon, it's basically Groupying.
And it's one of the first times we really
see a lot of this social commerce come together.
People are sharing deals online.
They all want to be a part of the same deal.
And once enough, people get involved in the deal,
the deal tips.
And there's lots of discounts.
It's gamified.
It's an exciting thing.
And it's viral.
It's a very popular business model.
And so he decides that this very novel business model
that he's seeing in the US, he's going
to be one of the first to bring it to South Korea.
So he moves to South Korea.
He starts what's called Kupong.
It's both a play on the word Kupong,
as well as Korean modemata Pia.
And so like surprise, fun.
That's the name of the business.
And at that time, he realizes there's
30 other competitors that are doing something similar.
Instead of backing out though, he gets creative.
He is one of the first people to advertise on Facebook.
At one point, they're showing 72 Facebook ads
to every single person in Korea.
And he's really just blanketing the market
with this novel marketing acquisition strategy.
A lot of people are hearing about this.
And it's also not that hard to get a consumer
to come onto their platform.
Because what they're essentially selling is discounts.
And again, there's a socialization.
It's going viral.
And it's a very popular thing.
People are using it with their friends.
They're going to small businesses and all that.
And we all know that Groupon, it turns out
is not the best business model.
We could get a little bit into why that is.
But he is starting to notice some of the cracks.
And even though they're making a lot in terms of revenue,
they're preparing to Ashley IPO, he's
starting to think that this is not
the most sustainable business long term.
And while he's providing something consumers want,
very often, the way it's working
is that they're helping consumers find these deals.
It's very impulsive.
It's spontaneous.
And it's not the same very quality, essential sales
that lot more commerce usually focuses on.
And so he's worried that this may be
is not the most sustainable business model at this time.
And so a few weeks before the IPO, before he's
set to make a lot of money himself personally,
he decides to pull the IPO.
And he says at this time that they are not providing
the 100x experience that they want to for their consumers.
And he decides that what they really need to do
is they need a copy Amazon.
They need to do this full logistics stack,
get very involved in not only the inventory
and the warehousing, but also the delivery.
And it's going to be expensive.
It's going to be hard.
We can't do it.
The pivot is a company that's just about to go public.
But this is what customers really want.
And so this is what they decided to go after.
There's a lot that I want to get into there.
I think we have a founder here who's
putting the new spin on being a Harvard dropout.
It's the graduate level of being a Harvard dropout.
But when you're talking about that time frame
where Kupong was mirroring Groupon,
I think Groupon's probably one of the best case studies
to look at from the past.
It was one of the fastest unicorns,
I think at the time the fastest.
But Kupong was having a lot of success with this.
What was the IPO discussion?
Any like valuation range that you have?
Just to give a sense of how successful they were,
whether it be a funding round or something
around the size of the business at that time
before they decided to make that pivot.
Yeah, I mean, they had hundreds of millions and sales
at that time.
They didn't get so far as to publish the valuation range
at that IPO, but it was a successful business.
Vomkin would have stood to make tens if not 100 million bucks
or something.
We don't have exact numbers at the time.
But it was very successful.
And a few other competitors take a monster.
We make price and out of all of these,
they were the most popular at the time.
And when they did end up doing their pivot,
they were able to get Sequoia involved
in a couple years later, Softbanked as well.
And part of that also was just because
of the early success of Kupong
and what they've seen with Vomkin being able
to outcompete the competitors.
So Kupong makes this decision to essentially copy Amazon.
Certainly a quality company to mirror
and model your business after.
But there's a lot that goes into Amazon.
There's a lot of costs that goes into Amazon.
There's a lot of logistics that go into Amazon.
Can you start maybe at the early stages,
you have this huge enterprise
that you might be looking to mirror in your local region?
What were the initial steps just in terms of taking
and existing successful business
and transitioning into what the Amazon model looks like?
Yeah, so when we think about Kupong,
there's all of these local deals.
And so a lot of it is about getting consumers
to go to these local merchants.
It's very much a discovery function
and very often it's focused on services.
So one of the early things they did
was they started opening up more of a third party marketplace.
But at this point, it's almost like overstock.
They're selling all of these items.
Again, it's these spontaneous compulsive purchases.
It's not necessarily something that someone needs
or looks for, the idea is that it's going to be
like a treasure hunt.
And you're going to be so surprised by this
that you're going to feel compelled to purchase something.
And so they play around with that clock timers
on their website and such.
And at this point, they decide that this is not really
going to be good enough sustainably.
And so they decide they need to do one P.
If they really want to get some of these more essential
high frequency purchase goods.
And so the first thing they do is they round a 2014.
They're now not only moving into one P.
They're opening up their own warehouses.
They raised a few hundred million.
I mentioned Sequoia was one of the early investors there.
And they're really just starting to go
at this business model.
They have at this time something called Rocketman,
which are their careers.
And all of this is done in-house.
It's not like Amazon piggybacking off of FedEx initially
before they build their own logistics footprint.
Instead, they right from the get go are going out
and building all of this out on their own.
And part of this is just because of the idiosyncrasies
of the Korean logistics market.
There's not as much that has been really prepared
for these small parcel packages.
And at this point, they have these Rocketman careers.
They are known for these conscientious deliveries,
where they'll sometimes write handwritten notes.
They'll know if there's a baby there.
And it should be mentioned that Korea is very popularously dense.
And so what that means is that a single career
is able to do sometimes at extremes.
And today, just a single high rise building,
maybe all of their deliveries for the day.
And so as a result of that, you are seeing a lot
of the same people again.
You get to know the area.
It's like your local deliverer, at least originally.
And so everyone is friendly with the coupon model.
They're starting to get more people involved.
Around 2015, there is a company called Market Curly,
which is a competitor.
And they want to do these overnight deliveries,
focus exclusively on grocery.
And their idea is that if you place an order by 11 PM
the night before, we will get you that delivery
by 7 AM the next day.
So sort of eight hour delivery.
Coupon rolls out something called RocketWOW a couple
of years later.
And they decide that if you place an order not just
on any grocery, but on any of our millions of items,
by 2019, they have five million items in this program,
we will get that delivered to you by 7 AM.
So they're doing now seven hour delivery.
By 2018, 99% of all deliveries are done in less than a day.
And they're ready pushing further and further
into doing the seven hour delivery.
And so by 2019, they also roll out RocketFresh.
Now they're also adding grocery to all of this,
which goes naturally with the seven hour delivery.
A lot of people the night before, they're thinking
about what they want to buy for the next day.
They could go ahead and put in their order
and it will just appear by them the next morning.
On the logistics build out to have careers,
to have basically the capability to do this,
to warehouse some of the product,
and to do some of the other things,
gonna use the Amazon parallel here.
It was a massive investment for them.
And at a certain point, they had AWS,
which was funding a lot of that logistics build out.
You mentioned Sequoia being involved
in the private funding here.
What did that look like just in terms of the capital intensity
to get this business off the ground
and transitioned into something that was warehousing
and delivering through its own network?
Yeah, so they did a couple hundred million rounds initially
with some VC investors.
Later on, SoftBank was a big investor.
They did a billion dollar investment.
And then it was more or less self-funded from there on out.
I mean, you do see there were negative cash flow
for the original few years, but they hit profitability
in around 2023, but in 2021,
they're still negative 1.5 billion.
So they did put billions into their logistics infrastructure,
but it's worth noting that South Korea is much smaller
than the US.
Again, it's much more populistly dense.
And so you're not looking at the same sort of investment
across a massive country and all these different areas.
It is more concentrated.
And they were able to get to very fast delivery,
24 hour delivery with a much smaller investment.
Logistics is one of the best markets
to prove the point that the globe is not homogeneous,
delivery in terms of rolling it out to new markets
is not homogeneous.
And I think we see that time and time again.
So bringing us up to where we are today,
what does the business look like consist of
when you talked about the various different things
that they're offering from a membership perspective?
You used some of the terminology that they use
in their actual business, but maybe just paint the picture
again for what this looks like now
that they've done all this investment.
Yeah, so South Korea population of about 50 million people,
22 million households, and they have 21 million active buyers.
So you can assume that most households have at least one person
who's a buyer there.
14 million members are these rocket wild members.
They're paying about, it used to be about five bucks a month
and then it was just increased to about 7, 750 a month.
Obviously they pay in one and there's a purchasing power difference.
So you should keep that in mind.
But it's still pretty reasonable.
And with that, you get not only free delivery,
you get very low minimums if you want to do grocery delivery.
And then on top of that, you get coupon play,
which is their streaming service.
They have SNL, soccer games, some other variety of content.
And then you also get discounts on coupon eats,
which is their food delivery service.
Usually a five to 10% discount.
And then they were testing for a while
on sole free delivery and I think they just went ahead
and rolled that out.
So you get all those benefits there
and they have some data that shows the more services you use,
the more likely you are to stay a member,
less like you are to churn.
And then of course, the more you're spending increases over time.
And at least right now, every single cohort of buyer
that joined coupon, you see that they increase their spend over time.
And so right now you're looking at buyers
that do a little over 1100 in revenue a year.
And that's up about three times since 2018.
Just hearing the penetration stats,
just in terms of global population versus who's a member,
is that increased frequency of purchase and just rolling out
more that they can purchase the main driver of growth for the business?
Yeah, I mean, it's a mix.
They were definitely still gaining customers over the last five years.
COVID was also pretty big for them.
They actually weren't the number one e-commerce player in South Korea until 2021.
And so we made this Amazon analogy,
but the thing that's very different between coupon and Amazon
is coupon really got into this business in 2014.
That's almost two decades after Amazon.
And that also means that there's plenty of time
for a lot of competition to fester within South Korea,
a lot of competition that's still lingers there today.
And so they do still have much lower market share
at this point of penetration than Amazon did over all e-commerce.
And so that is one difference worth keeping in mind.
When you talk about that competition,
maybe you can mention, I know you already have reference to a few of the names,
but how those players look relative to coupon.
And maybe just why they were able to actually carve out
now being the winner in the industry,
or at least being number one in terms of market share,
how they were able to get that stranglehold on the industry.
I think you pointed towards the capital
and then having somewhat of a driven entrepreneurial visionary founder.
But what else was it?
Because these are very, very hard markets to compete in.
And I'm curious what you would point to there.
Yeah, so we could split competition up into three buckets.
We have the department stores and big box retailers,
which include Lowe, Shinzegei, Hyundai, and Costco.
Then we have the more e-commerce pure players.
Most of these are marketplaces.
There's Lowe on ebaycrea SSG.com, market curly,
I mentioned, and then some other ones like 11th Street,
Teemon, we make price.
Those are still there from the Group on days
and they themselves slight pivot into more of a marketplace.
And then we have the internet players,
which are Kakao, Kakao is the number one messaging service in South Korea.
And NAVER, NAVER is like their Google there.
And of all of these, we would say that NAVER is the biggest competitor there,
followed by maybe SSG.
And we'll touch on competition a little bit in the second,
but to your question on why Kupung was able to be such a late entrance
and still succeed so well, ultimately comes to the fact that
if you think about the consumer hierarchy of preferences,
which is what does a consumer really value?
A lot of times when you're making an e-commerce purchase,
of course there's price selection and delivery speed,
but they also really care about reliability, consistency, and trust.
And none of these players really were hitting on that
because they're the third-party marketplaces.
A lot of times they don't even have the inventory in stock
before they go ahead and sell it.
It's going to be a very inconsistent delivery experience.
So whenever you're buying on one of these platforms,
you're always wondering in the back your head
if something's going to go wrong.
And that creates hesitation.
It creates friction to purchase.
Whereas Kupung, by virtue of the fact that they actually own all of the logistics,
they did the first-party inventory route.
And they were very quick to capitulate anything wrong,
any returns and anything.
It built a lot of trust and consistency over time.
And so that creates a different sort of purchasing habit.
You have to spend all of this capex just to get to the top of mind positioning
in a consumer's head where they're no longer hesitating before they buy.
If you go to an e-commerce site and you're not sure
if they're going to be reliable or not,
you're in the back your mind creating contingency plans
and thinking of other places that you could potentially purchase this item.
And if there's all these other places you could potentially purchase this item,
sometimes these alternatives are going to win out.
And so ultimately Kupung built this relationship of reliance
that no other player was able to do.
And one of the things that stands out when you list those competitors,
you've mentioned Costco somewhere deep in the big box category and then eBay Korea.
But besides that, none of the large names that we know so well in the US,
what do you think drives that market dominance by?
What seems like local players?
Yeah, I think it's going to be mostly cultural factors.
It's just a very different market.
It's more insulated, it's monoethnic.
You have to understand their culture and customs.
They're going to prefer to have their own market leaders.
And it could be a lot of more subtle things as well as the way you provide your offering.
When a lot of e-commerce players tried to go into China, Amazon, for example,
they came in with this very clean web page, which was white and basically very similar
to the website you would see in the US.
We like it because we consider it clean and easy to navigate,
whereas a lot of Chinese consumers considered it very boring and plain.
They wanted something more like Tau Bao, which is Alibaba's marketplace.
That was a crazy website with lots of stuff going on, timers,
and the web page was filled, and there was no white space at all.
Google got a similar criticism when they're there, even though one of the local search engines
ended up copying them.
But either way, the point being that there's all sorts of differences that you can't
really catch on to initially unless you are part of that culture.
And that's part of it.
And then also it is a lot of these big department stores, a lot of these tables that directed
a lot of commerce for a long time.
And even within that coupons and some of these other e-commerce players are a bit of an
anomaly and that they've been able to break through and become these relatively big pieces
of the economy.
When most of it has been directed by these larger, more government-friendly corporations.
On that point, on the government-friendly corporations, I once had a logistics provider,
a large company, tell me, you don't go into China alone.
You don't go in by yourself.
You have a JV, some type of partnership.
That's the only way to succeed in that market.
Are there similar dynamics just in terms of government involvement in the private sector
with these businesses that drive some business outcomes maybe more than just total free markets
would?
It's a pretty capitalistic economy, at least as of late.
But that definitely always hasn't been the case.
You could see some more pro-worker benefits as well as protections come into play.
Kupong had a fire at one of their warehouses a few years ago and that brought on a lot
of scrutiny over whether or not their rocket couriers were being forced to work too hard.
Of course, they would push back at that claim and say, look at all of the jobs we provided.
Everyone's obviously employed at will.
They're well paid.
They get benefits.
It's not like the DoorDash relationship or some of these other food delivery platforms.
So there is a little bit of a difference there.
Just on the South Korean consumer relative to what we might be familiar with in the US,
I think you mentioned the dense population, which might be similar to some of the urban
environments in the US.
But are there certain things that you would point to that are true differences between
a South Korean consumer and a US consumer that would matter for the Kupong story?
I think the important thing to note is the differences in the markets.
So South Korea never had the same development and specialized retail that we have in the
US.
You could think of chain auto stores and auto zone comes to mind.
O'Reilly's comes to mind, advanced auto parts.
So we have multiple of these different specialty chain stores, whereas in Korea, retail never
developed the same way.
And so they're missing a lot of selection.
In addition to that, and because of these big chables directing a lot of commerce at their
department stores early on, there are also more protections that maybe aren't the most
consumer friendly.
There's something called the Fair Trade Act, which actually makes it so you're not allowed
to disclose MSRP's on electronics, which the byproduct of that is that a lot of electronic
prices are much higher.
You're buying in store.
And so this was the environment in which e-commerce not only provided a lot of selection
that didn't exist otherwise, it also was lower prices because you were able to undercut
some of these factors.
In terms of actual behavior, a couple of things worth noting is that there's very little
crime or theft in South Korea.
And so you are able to just leave an item outside your door when you return it.
You don't even need a package or anything.
And Kupong will just pick that up for you.
When they do deliver their groceries, it comes in a cooler bag.
The cooler bag will just be left outside during the day.
And there's not an issue of people stealing it.
And so that does make it easier to do many of the things they've done, the innovations
they've done as well.
It's just because of that difference in behavior.
And then of course, also it being so populistly dense.
Brings up a miscellaneous question here.
But on the returns, I know in the US, I think e-commerce returns were close to 30
percent.
And it's just this huge drag on the business for a lot of these companies.
Then you see these unique categories like children's clothing, which is closer to 5 to 10 percent.
And it's actually this massive advantage for them as e-commerce businesses.
Is there anything unique in that category?
Now I think just the lack of lost packages certainly has an impact on the business.
But anything else in the category of returns or anything along those lines?
Well, they've never disclosed return rates.
Except if you look at competitors and neighbors, one will get into in a little bit.
One of the big advantages Kupong has versus them is that it is much easier to return items
because you're dealing directly with Kupong.
You're not dealing with this variety of merchants that maybe have different policies as well
as maybe having to go to a post office and package it individually to get it back.
And so they've gone further than Amazon in this respect.
And some of this is the backdrop of the culture.
But they are able to really remove a lot of the frictions from returns, which then when
you go to buy something, it means that you're not going to be hesitating to buy it.
And very often you'll end up just keeping it because it's either cheap enough or good
enough in whatever the issue is.
But if you're taking some of that pre-research out of the process before you purchase something,
then it's much more easy to actually get that conversion.
And on pricing, I think you made reference to this Amazon on the early days.
You could typically find the best price, particularly when you factored in shipping, maybe no longer
the case today.
Where does coupon stack rank relative to the big box players in terms of price and some
of their competitors?
In terms of versus traditional physical retailer, they're in line too much cheaper.
But if you're looking at actually the cheapest options, you still do have Timo Ali Express,
which you're not going to get the same quality of items there, the same trust that you would
with coupon.
But then there also is Naver, which will fork you off to a bunch of different third-party
merchants, but those merchants themselves usually do have much lower pricing.
And that's just a byproduct of the fact that they're not paying the coupon commissions,
but also sometimes because they also don't have to pay for the fulfillment, the shipping
is cheaper, even though you might have to pay shipping individually as a buyer.
And so that's the environment there.
They'll quote some study that they did where they say we're cheaper than 60% of the alternatives
across some of variety of basket of items.
And they are very much focused on bringing that price down.
But it's just hard when you do have that much of a commission structure built in to say
that you're always going to win on price.
But at least in talking to the South Korean consumers that we did in those correspondence,
what they said is on very low items, they're cheap items, they're always going to coupon,
they don't care about a small price difference.
If you're looking at a very expensive item, it was interesting.
Sometimes they do want a price compare, but at the same time, they're willing to pay
more because they want coupon to ensure if anything's wrong, they'll be able to return
it.
So they win there, even though they may have a more expensively priced item.
And then on these mid-priced items, particularly stuff with apparel, cosmetics beauty, they're
a little weaker in categories there.
And so that is also where others tend to do better.
But on just pure pricing, they do well enough, but they definitely will lose some portion
of the most price-conscious consumers.
And just in terms of building up those product categories, what has been the process in doing
that?
Has it been any acquisitions, is it all being developed and done in-house?
They certainly have an advantage to the extent that they were shipping third-party volumes
just to get a sense of where there's consumer demand.
But what has been that process just in bringing more and more of that in-house?
Yeah, all of it has always been in-house, no big acquisitions or anything like that.
I know Amazon in the early days acquired diapers.com to fill out some of the baby categories
and et cetera.
So you do not see the same thing there.
It was all one P to build out the initial categories.
And they still do need to go further with that.
They've brought on and emphasized 3P more in the past couple of years.
And so part of that is also to help fill out the selection.
As I mentioned, cosmetics, beauties, apparel, those are some of the weaker categories that
need a little bit of help.
They did recently do an acquisition of Farfetch, which is a little confusing exactly why
they did that.
Although they paid half a billion for the company and they had four billion in GMV.
And so usually that would be considered to be a pretty attractive price.
And so we'll see what they do there whether or not that is an angle to try to also buttress
the peril category.
But otherwise it's all been in-house and now leaning more on 3P sellers to fill out
that last bit of selection.
Bringing it together from a top line revenue sales base, how do you look at the business
just in terms of what it looks like today and maybe some trend lines in terms of how
that top line has trended over the past five years, three years, whatever you think is
an important reference point.
If you're thinking about the retail tab, coupon will quote a number that it's $480 billion.
Our estimates are a little lower.
They include some things like travel services and possibly restaurant spend.
And so we'll peg that a little closer to $400 for $20 billion.
And then if you think about e-commerce penetration, South Korea has some of the highest e-commerce
penetration of any country in the world.
Having said that though, and to the point I was making earlier on them having very limited
specialty chain store selection, you would actually expect that.
And so e-commerce penetration, we peg around 35%, you could take a range around that that
gets you somewhere around $145 billion in e-commerce tab today.
But if you think about coupon, they aren't just going after the existing e-commerce
tab.
They could definitely grow e-commerce as a percentage of overall retail tab.
And so right now they have about quarter penetration of just the e-commerce market, but it's
a high single digit penetration of the overall market.
And so they do have a lot of room to run.
South Korea though, the population is not growing.
It's flat to slightly shrinking over time.
So that's something keep in mind, but the wealth and how much people are making average
incomes are going up a little bit beyond that.
But mostly it is not necessarily about new markets or anything like that, but it's about
just more penetration, building out more of these categories, and just continuing to get all
of these consumers that are currently purchasing on coupon, have the behavior of their best customers.
Which again, we have started to see over time, the longer people are on the platform, the
more they tend to buy, the more categories they buy through.
Just taking it down to the cost line, you mentioned a little bit in terms of the labor force
and what that looks like.
I think that's been one of the hidden benefits to a business like Amazon where they don't
have a union workforce, at least yet.
They have the contractor model that certainly works with their benefit in terms of the
career side of the business.
What does it look like here just in terms of the big buckets of costs?
Any added commentary that you have on the margin profile of the business that would all be
helpful?
Yeah, so I'm going to disappoint you here because they only report one operating expense
line item.
Love it.
They buck it absolutely everything together in there.
That's definitely one of the criticisms you could get.
In terms of gross margins though, they're doing about 25% gross margins, and you would expect
those to go up more, but it doesn't mean so much as they switch from just emphasizing
1p to 3p.
Right now we estimate that 1p is about 55% of their business and 3p is 45%.
We were able to triangulate that number because they give different reporting segments from
the revenue items.
You could back into that figure and then they also had an accounting change a year ago,
which also helps you triangulate into that.
Big picture, we prefer to think of them in terms of GMV rather than revenue because again,
if you're selling something on 1p, 100% of the item is recorded as revenue.
It's 3p.
It's just the commissions.
More 3p distorts the economics of the business.
We'll think about it in terms of GMV.
We estimate GMV somewhere around 38 billion altogether.
There's a range there called it 35 to 42.
If you're looking at that, then we would want to look at the margin as a percentage of
GMV rather than revenue.
Again, we do this because of the distortions that the different accounting treatments of
1p versus 3p causes.
You can go to speedwellmemos.com and we talk more about different accounting treatments.
We have a couple pieces on that that explain the differences if that's confusing.
In terms of cost structure and all that, they give us very little.
That's where we are now.
On the third party commissions, do you have any sense of what that actually looks like,
what their take rate is or however you would measure it?
Yes.
There's three components to their commissions.
There's the selling commission, which is just any product that lists there and ends up
getting sold.
You're paying that commission.
That's anywhere in the range of 5 to 11%.
Then you have advertising layered on top of that.
We don't have exact figures from that, but in talking to some merchants, that can be
pretty considerable, call it anywhere from 5 to 15%.
You'll also layer on logistics as well, which could be another 15-ish percent.
This is going to vary, though, by the type of item, the size of the box, how much advertising
you're doing, how well the item is selling.
On a total consolidated take rate level, coupon is somewhere around 11%, which does suggest
that there's a lot more penetration to go on the advertising side as well as fulfillment
side.
The rule that thumb people use is that advertising revenues could be somewhere around a 45% of GMV.
Fulfillment as well, it just depends on the overall adoption overall, but that could
be 15-20%.
If you're looking at someone like Amazon, they're fully low to take rates on someone who's
using all these services, maybe call it anywhere the vicinity of 35 to 45%.
Thinking about the business overall, you have this large logistics infrastructure.
Some of that in terms of careers, I'm sure there's a variable model there, but it does
seem like there's a lot of fixed costs.
Is there inherent operating leverage in the business model?
Yeah, there's definitely operating leverage in the business model.
We could just look at what they were doing in 2021, which was they were losing a billion
and a half in EBIT, and we fast forward today, and they're doing about plus 500 million.
If you're looking at how much they invested over that time period, it was relatively small
relative to the total amount they've invested over the life of the business.
You do see some operating leverage there, especially just operating margins and flexing.
On top of that, I think the thing to consider, though, is that there's a difference between
the maintenance and growth cap ex, and so what they're still doing is they're still building
out a lot of logistics infrastructure.
They have 47 million square feet plus of logistics infrastructure space, and that number
itself is from 2022.
They have over 100 fulfillment centers, and they're not going to have to continue to build
out fulfillment centers indefinitely.
We'll have to see exactly what the maintenance for a growth cap ex portion ends up being,
but a lot of these expenses are very much front loaded, and you'll see something similar
to Amazon, which is when you're no longer building out all of this infrastructure, you
should see the margins continue to inflect up.
The next natural question is, where can this go over time?
What is the parallel, whether it's Amazon or something else?
I think on that take rate number, you gave terms of the potential there and what Amazon
gets.
It's impressive, but what else would you point to just in terms of mature business and
where it could get over time?
The thing I would point out on the take rate is it's not necessarily the most informative,
because you could have a very high take rate and a large portion of that could be not very
contributed to EBIT, which is usually the case with the logistics stuff.
At least for now, it's definitely not as profitable as, say, advertising.
Also, keep in mind, these businesses are offloading more and more of their operations to
coupon in this case, you have them doing not just the logistics, not just actually getting
the item to someone, but also storing it.
You have them finding them, the customer, you have them doing almost everything involved
in it except actually picking the item and the listing.
As it continues to be the case, they're taking on more of the value of the transaction.
It makes sense that they're able to take their share of that.
In terms of mature margins, everyone plays this game where they say, let's look at a Walmart,
let's look at a Costco, let's look at a Target.
These are these fully-scaled retailers and they're able to get, call it anywhere in the
range of a 3 to 6% margin.
We think that if you're swapping out a physical land footprint and the store-to-store logistics
operation they have for an e-commerce warehouse footprint and last mile logistics that will
be able to have a similar markup on all their items.
Everyone focuses around on a same mature margin framework, which will put you somewhere
around 5%.
Keep in mind, though, again, back to the counting distortions.
It depends if you're doing one P versus three P, something different about coupon and
as Walmart and some of these other retailers are starting to figure out too as well, is
that if you get into advertising, then you're able to actually extract more of the value
of the transaction.
Of course, a platform like Amazon coupon, it's very natural to have advertising.
People come there with very high intentionality of what they want to purchase and they tend
to not want to be there that long.
Getting a top spot in the search engine results, it's very valuable.
They're able to monetize through that as well.
I believe they said long-term adjusted EBITDA margins are somewhere in the vicinity of
8% to 10%.
We'll say that probably EBIT mature margins will estimate somewhere around 5% to 8% call
it.
In our report, though, we'll sensitize around different variables and then you back
into it to see what the associated return is.
You could see what you're paying for today instead of an opposite of that, which would
be what do I need to happen and how much money am I going to make?
Why extrapolate that mature EBITDA margins versus mature EBIT margins?
You're assuming something in the 2% to 5% maintenance cap ex sounds like.
What does that compare to their overall cap ex spend, whether it's percentage of revenue
or something else along those lines, just to give a sense of what that free cash flow
unlock could look like?
If you're looking at cap ex to DNA, it's over 2x.
Again, the issue there is we don't know what growth versus maintenance cap ex is.
A lot of their cap ex is still trucks.
Those definitely have a lifetime, but if you're looking at a warehouse that has a pretty
long lifetime and you'll have to do some stuff to update it, but you're not buying new
land.
Exactly where that's going to shake out, it's unclear.
But I will say the advertising portion of it is the big difference versus some of the
more traditional retailers.
If you're looking at Goalmart at 5% or something, when you're layering and advertising, you
should be able to get a couple more points on top of that.
On the advertising, I know they don't separate exactly what they're generating from that,
but do you have any gut sense of where they are in terms of building out that muscle and
that adoption and penetration in that market?
I would just say that the merchants we spoke to didn't get upset about the advertising
until a couple of years ago, which was when more of these sponsor ads would show up in
the search engine results and they felt like they had to play along, but it's still a relatively
nascent effort.
Just in that topic more broadly, as you look at a business like Amazon, I have a hard time
differentiating the people that I read, they're commentary the merchants on Amazon who complain
about it and how big of an issue that actually is.
I think Google and SEO is very similar, just in terms of how much it became table stakes
to be spending into that.
Do you just have any sense on that phenomenon in general and how much control these brands
will have over the longer term?
Yeah, well, branded versus unbranded is the different question, but BOMP Kim would say
that merchants are like bees and customers are the flowers.
The bees always go to wherever the flowers are.
What that suggests is who has the real leverage in this relationship and it's the one who controls
the traffic of all of their customers.
In the case of Kupong, they have tens of millions of people who spend 40 billion roughly on
the platform a year.
If you're looking at that figure and you want to get a piece of that, you're going to
have to play by their rules.
We've seen this before where merchants try to protest.
I don't know.
People probably don't recall, but a lot of Etsy merchants would do this every couple
of years when they're changed their policies and they'd say that the platform is changing
from what it used to be and tens of thousands of them would sign these petitions and make
a good amount of noise.
But it never impacted sales whatsoever because at the end of the day, you're never usually
even going into the second page of the search engine results.
People pulling out where you're now reducing the 9th, 10th, 11th page, it doesn't really
have any impact on the actual sales.
They have to play along and they don't really have the leverage in that relationship.
It's a little different with brands.
If you are looking at a brand like Nike or some well-known cosmetic brand where people
are searching specifically that brand, they do have more ability to command what they want
to command, but in the case of coupon, they're not going to change their rules just for one
person.
They either have to decide their strategy.
Maybe they're only putting on a select number of items on the website.
Maybe they're putting nothing on them.
That's their own forogative to decide what they want.
But they do have a good amount of brands and a lot of brands figure out that if people
are searching for something, they may have thought their brand was stronger than it really
was, but what people really wanted was to get the item by 7am tomorrow.
If that's the case, you're losing that sale if you're not on the platform.
It truly is incredible now when you search for certain brands, whether it's on Google
or on Amazon, and you have to scroll down quite a bit to get to those brands because there
is sponsored content or sponsored products from competitors sitting above it.
Just a very interesting dynamic to think through.
I think we're still coming to grips with what the digital age means.
It's no longer the shelf space that stands in front of you in the grocery store.
It's something that looks very different.
As you think through the various buckets of investment and where they are investing
dollars, logistics network seems like a big thing.
Are there other categories, whether that's just from a dollar standpoint or from a new
initiative standpoint, that stand out to you as important potential growth avenues for
the business?
Yeah.
Well, they break up their segmentation in terms of product commerce and these developing
offerings.
Within that, you have eats, which is their food delivery service.
That's something relatively new, but then you also have a couple new markets.
They did something in Japan that was more quick commerce, as it was called.
The idea was that maybe there would be the weakness where people did one items within
30 minutes or so.
They rolled out these small fulfillment centers in Japan where they had people and motorcycles
ready to go as soon as an order came in and they would only have 300 items or so and
bento boxes, which is like lunches.
That turned out to not be so successful.
I think they picked that route to try to attack e-commerce in Japan because the environment
there is more mature and has a lot of offerings.
They tried to find something that maybe wasn't being fulfilled, but it turned out consumers
didn't care about that.
They ultimately abandoned Japan.
They considered that to be a failed experiment, but they went into Taiwan as well.
They did something similar initially, but then they switched it.
Instead of doing this quick commerce, they decided to do the full rocket-wild experience.
As of early 2023, they were opening up fulfillment centers trying to get as much selection as
they can and really just copying the playbook from South Korean.
They've noted since then that that's been going pretty well.
On top of that, they have the number one shopping app in Taiwan for at least some period of
time.
Again, the e-commerce market there too is a little different.
You don't have Alibaba.
You don't have JD.com.
JD.com is most similar to Kupong in that they have their own logistics.
This first party or at least initially started as first party.
Very much focused on that trust and consistency aspect.
There's no player like that in Taiwan.
They're hoping they could take that niche and it seemed to be going pretty well so far.
That's definitely the in-area of investment for them.
It's worth noting that when they were investing in Japan and it didn't work, he didn't make
any illusions about it or excuses.
They just cut the spend there.
They said it didn't work and they moved on, which is exactly what you would want to see
owner operator do.
Taiwan seems to be working with some success.
Are there other countries, markets that you think are natural extension of what they've
done in South Korea that could also be at the very least testing sites?
They have an office in Singapore and so it's potential that they roll something out
there but that's relatively small as well.
There's all of Southeast Asia that could be a potential target but that is a very tough
geography to go after.
You're talking about hundreds of different islands.
You're talking about multiple different countries, languages and if you're coming in with the
idea that you're going to build out this full logistics footprint, that is going to be
very hard and very expensive.
There's the potential for that because they don't have the same first party fully integrated
logistics operator there.
That door is open but I don't think that that's going to happen for at least some time,
especially considering the fact that you're looking at much lower average household incomes
whereas in Taiwan it's very similar to South Korea and so that's a very natural extension
and coupon gets the criticism very often that they can't grow that much because they're
pretty mature in a lot of their markets and that is true to an extent.
They don't have this massive greenfield but for right now it is mostly about just extending
out more categories and getting more people to buy more items on the site and getting a
good customer to become a great customer in some ways has been easier avenue of growth
than launching a whole new market and hoping that sticks and can end up being profitable.
I can see where Taiwan and South Korea the household income maybe falls into a similar
category.
When I think of Singapore, I think of very high household income.
I could have that wrong but do you think that's fair to say that that would be a different
test case in a similar way to maybe how Japan was not as similar to South Korea.
It's definitely similar in terms of them both being populistly dense high average incomes.
I don't know whether or not JD.com operates in there or how popular they are there.
You could see a similar opportunity but again it's a pretty small city state really so
it's not going to really move the needle versus if they could really get Taiwan right.
On the risk side of the equation, I think you mentioned a common pushback is that they're
heavily penetrated in the South Korean market so the growth runway is maybe not as attractive
as some other more emerging businesses.
What else would you say is common pushback that you hear on Kupang?
I wouldn't say that that's a risk either.
That's just something that limits the potential upside if you will.
The real risk is probably NAVOR is one of the number one things that I would think about
and just to talk about them a little bit for those that aren't familiar.
NAVOR is basically the Google of South Korea.
A lot of people still will start their search journey not just on NAVOR for general search
but for product search as well. A lot of our consumer correspondence, it was very common
for them to also look up the item on NAVOR.
Since they do have that early spot in the consumer journey for a lot of consumers, they
have the opportunity to continue to make their product better for people to potentially
buy there.
Don't think of NAVOR as Google shopping because it is much better.
They have a lot of price comparison directly on the site.
They have something called NAVOR pay which almost everyone in the country uses similar
to Apple Pay and that it is very easy, has your preloaded information, banking information,
shipping information.
It is very easy to check out directly on the site.
They also have something called smart stores which is where the merchant will actually
upload their catalog of inventory into the NAVOR format.
It is a uniform format and people have not navigated it which again just increases conversion.
On top of that you are looking at them being able to aggregate basically every single item
available for sale.
They will even have coupon items on NAVOR, you will have to go through coupon to purchase
it but they can aggregate those results as well.
A lot of people will start their journey there just to do a price comparison.
Of the consumers we spoke to, about 20% said they use NAVOR more than anything for their
e-commerce purchases.
That is very dissimilar to the US where I don't believe there is a player that has this
20% market share position second to Amazon.
That is something that is there, it is a latent risk if they continue to get better.
Coupang though was used by about 60% of consumers as their number one e-commerce platform.
They do have a clear lead there.
They definitely are hitting higher consumer preferences, delivery speed, consistency, trust,
order E's, selection and to a lesser extent price.
That is hard for others to hit on but Coupang, the thing is it is going to continue to get
better.
They are going to continue to reiterate on that.
As long as NAVOR is trying to aggregate all these merchants together with different incentives,
the merchants don't necessarily want their inventory housed in a NAVOR warehouse which
is an initiative they have in partnership with CJ logistics called NAVOR shipping alliance.
They are trying to back into creating this unified front where they can offer a similar
experience.
It is just very hard when you are coordinating all of these different parties together.
As an example, we can look at Ali Baba who tried to do something similar.
Their shipping service they put together was called Sainal and they grouped together.
I believe there was six different shipping partners.
Ultimately they had to invest in them and take stakes in them.
It makes sense that you provide the software and all of the volumes that these shipping
partners will be able to connect and figure it out.
In reality, everyone has different prerogatives.
If you look at a Coupang truck, it is literally designed for these small parcel packages.
You open up the door on the side where as other trucks open up in the back.
That seems like a small thing.
If you are shaving off a few seconds every time or minutes every time you make delivery,
that is going to add up to more efficiencies over time.
Coupang is the thing that they can really optimize for just a few variables.
They can continue to iterate to make their offering as good as possible.
Whereas everyone else, they are all balancing these different prerogatives.
What Navar is going for it, it is vastly cheaper.
Including payment processing fees.
You are looking at a take rate of less than 5% to sell in there.
Of course, a lot of people still search on Navar so you do up considerable consumer traffic.
To the extent that they get the straight with the Navar shipping alliance,
maybe you do also get quicker delivery.
On the Navar Coupang, basically having two players that have very large percentages of
the market.
When you think about where this market is in five years, is it a winner-take-all market
where Amazon seems to be the dominant player.
I think you have Wal-Mart and Costco's who have big box presences.
It differentiates them just a little bit in terms of the delivery.
The other market that I think of is Uber and Lyft being the two players that have carved
out space in the ride share and ride economy.
What do you see on the horizon for these two players and the way that this market settles
out in five to ten years from now?
There definitely could be more than one winner.
I see Navar as being a little bit more like Shopify is in the US.
You still have that dynamic where there's this alternative.
You get to control a little bit more.
But at least in Navar's case, they do also help bring in some consumer traffic.
Coupang definitely has the opportunity to just take share from a lot of these other e-commerce
players.
There's a bunch of them that don't provide a very clear and strong value prop and they're
more legacy players that are just hanging onto some of the customers that they still have.
That I think is one avenue for them.
You will see physical retail will still be there.
There will be some players that are able to leverage, especially Shinze-Gai, their
Omni Channel abilities.
There's also going to be a lot of vertical specific marketplaces, one focused just on cosmetics
and beauty.
Then market curly is just focused mostly on grocery, although they're moving out a little
bit into cosmetics as well.
You'll see all of these other players chip off.
If you're thinking about the position that stays top of mind where it's like I need something,
I want it quick.
What is it?
Where do I go?
That's going to be Coupang.
That's what they're trying to win.
That behavior and that commerce transaction is definitely the most valuable of all of
them because it's very frequently that you're going to purchase something.
It's essential goods, so you've got to buy it usually.
Then on top of that, it's just going to be a huge volume.
Something else they've done that we haven't talked that much about is Rocket Fresh, which
is their grocery initiative.
Grocery is such an important category for an e-commerce player.
It's the reason why Amazon and Walmart are tripping over themselves to try to win this,
because it's something you have to do usually weekly, if not biweekly.
You've got to buy food.
High frequency, it's essential.
You can't do without it.
You don't have substitutes.
Then on top of that, it's usually a pretty large order value in and of itself.
It's mostly about getting that behavior and habituating the consumer to your platform,
so they're continuing to purchase.
Once you get that, then you have your cross-sell opportunities, of course.
When you're looking at a company like Amazon, Coupang, it's not about cross-selling them
necessarily in the moment.
It's more about getting that position in their mind where they think they want to buy
something and they think Coupang.
That is where you want to be.
It's almost simultaneous where you say, I want to purchase something and Coupang.
You could buy something on their site in under 30 seconds.
You whip out your phone, click the app, search it, you hit buy, and that's it.
You don't have to worry about it anymore.
That is ultimately the kind of commerce transaction that is the most valuable.
There's always going to be other players that offer more variety, more selection, brands
that don't want to sell on there.
They're never going to win at all.
If you could get a huge chunk of that most valuable behavior, then that's going to be
pretty good business.
Valuation, I think your earlier point on the pushback, it's not necessarily a risk, but
it could cap your upside in being in this market having seen such high penetration.
It just makes the valuation question really interesting here.
How do you approach valuation for a name like this?
I'd be very curious just in terms of how you think the market views the name and how much
that question mark over long-term runway plays a role.
Yeah, so I approach it the way I always do, which is the reverse DCF.
You see what assumptions that you're comfortable with, and then you see what the implied return
of those assumptions would give you.
You can sensitize around various growth rates, various market share assumptions, and then
what they ultimately will do in terms of EBITZ, a percent of GMV.
Then you'll see the associated return with that and make a judgment whether or not you
think the potential risk you see is worth that return.
That's how I always answer these questions, but it is the case that you're right.
It is potentially limiting, but you may also feel that a company that has such dominance
in a market and is able to grow by just adding more categories is a lower risk growth than
opening up a new market and having to count on that being successful.
Any sense, just in terms of what the market is saying at the current valuation of where
it is, is it highly evident that there is a question mark over long-term growth?
Yeah, I'm going to be honest.
I never know exactly what the market's thinking.
I think that maybe they were expecting even more growth or something like that, but they
did 18% revenue growth in 2023.
They accelerated revenue growth a bit, and it's also FX messes up those numbers as well,
so they're a little bit higher.
But I don't know what you would really expect or what you would want to see.
That's hard to get into the mind of the market, if you will, but they're doing a one and
a half billion in free cash flow.
Again, this is just 10 years after going into this fully integrated, large logistics operation,
and that's much quicker than even Amazon was to turn on profitability.
For every dollar of inventory they hold, they have $3 in a counts payable.
If you know Autosome, they love to talk about their counts payable as a percent of inventory.
This number for Coupon, it's 300%.
So it is much higher than doing almost 10 times inventory turns, and some of this is a little
byproduct.
The fact they have this third party marketplace and all that, but they are just turning
inventory very quickly.
If you were to go look at their financials when they IPO'd, and they IPO'd at a much higher
evaluation, I believe it was around 60 billion, they were losing money.
They didn't have the same grip on the consumer as they do today.
They didn't have the same number of active customers or rocket wow.
There was a couple more question marks there for sure.
It seems like everything bomb came wanted to execute on.
He's been able to execute on getting into the mind of Mr. Market is not something that
many of us can do.
Start to wind down the conversation here.
It's a question I've asked you on the other episodes you've been on.
But what would you point to as the key lessons from Coupon?
I guess that you could be a pretty late entrance in as long as you were fulfilling consumer
preferences that are still on Met, you still have an opportunity for this top leadership
position.
I think too often people think of this first mover advantage in this Vomorphus way.
We relate to the e-commerce game, but it's not about just serving e-commerce quote unquote.
It's about actually finding what these things are that consumers value and figuring out how
to serve them.
If you think about Coupon, they basically optimize their entire business around these six factors
of delivery speed, consistency, trust, order, e-selection, and price.
Everything they've done is to serve those preferences better than anyone can otherwise.
I talk about this idea of a meta optimization, which is what are you optimizing your business
for?
What outcomes are you optimizing your business for?
The thing you see with Coupon is they were very late to this game, but they were able
to pick the right preferences and optimize for them better than anyone else before that
they were able to win to such a large degree.
Look at how their model, how their flywheel is set up.
It all starts with the warehouse.
You've got to get this huge warehouse footprint.
Then you have to store it with a lot of inventory.
You're not going to be able to get third-party merchants to send you inventory, so you're
going to have to go the first-party route.
If you go the first-party route, you're not going to get very good terms initially because
you don't have the volumes.
Otherwise, it's very expensive to try to buy in bulk for items you're not even sure
you're going to be able to sell.
Once you get the items and you get the exclusive inventory, then you have to figure out how
to get the customers, which by the way, Coupon already has half of all of Korea signed
up for their service and on their membership program.
Once you get the customers, you're going to have to get them to buy and habituate them.
They continue to create these volumes.
You're going to need all of these volumes in order to create the data that allows you
to know where to actually put the inventory so you can properly optimize your logistics
network to get anywhere near one day, let alone seven-hour delivery.
All in the process, you're going to have to do these process innovations.
You're going to switch the way that you upstream sort your packages.
You're going to move from cardboard boxes to plastic, which by the way, they got rid
of 85% of all the cardboard they used to use in their operation, which isn't ESG thing.
It's about saving space.
Now they can stuff way more items in an individual truck and have one person deliver more, making
each truck more profitable.
All of this feeds into itself and then you get more consumer habit because you have a
great service and people trust you more and they're ordering on your site more and it
creates more volume.
The volume creates more data.
It creates more ability to go out to your suppliers and buy more at a cheaper price and on
and on and on.
Once you do that, then it's very easy to add in this third-party merchant aspect because
you already have all the consumers on board.
You can use your one-peat to make sure you're keeping your 3p merchants in line.
The 3p merchants have to offer a similar value prop as to what they could do, otherwise
they're just going to fall way down in the search engine results.
You have to have all of these things together in order to really stir the consumer well,
which is the problem that a lot of companies make all the time as they'll see a couple
of these preferences and they'll try to go after them.
But they can't go after them unless they re-architect their entire platform to really
serve the consumer in these specific areas.
You can't have asked this stuff.
You have to do it all.
There was ShinzeGai, which is SSG.com.
They tried rolling out very quick delivery and soul.
If there's any area in the world where it'd be easy to do it, it would be in soul because
how populously dense it is and how wealthy they are on average and still they weren't able
to do it and they weren't able to do it because they're trying to work from a store footprint.
You can't do it if you're holding all your inventory in a department store and you have
someone picking and packing from the aisles of the men's clothing department where everything
is out.
You have to be fully in and you have to re-architect everything to iterate on these
specific preferences.
That is what I would say the lesson is that you could be very late, but as long as you
identify preferences that are unmet and you are able to organize your entire business
to fill those preferences better than anyone before, you still have an opportunity.
Very well laid out.
Still feeling some similarities in parallels to Amazon, particularly after you got past
the, they were late part.
And I think there's just a really, really interesting case study here from the initial pivot
to the founder owner operator and to everything that goes into, like you said, if you're going
to have this flywheel which can get thrown around a lot, it really does need to be incorporated
on so many sides of the business and certainly looks to be the case here.
Drew, thank you again for sharing the knowledge.
It has been a pleasure as always and it was a pleasure going outside of the US with you.
Well, thank you for having me and if an hour of Coupon isn't enough for you, we have
a two hour and ten minute episode on Coupon on our podcast called the Synopsis.
So you could learn more about bomb Kim.
There we go.
Thank you very much again.
Thanks for having me.
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