Shares of Coupang (CPNG 0.68%) were on the move today as the South Korean e-commerce company jumped on reports that it was raising the membership fee for its Amazon Prime-like Wow service.
As of 12:39 p.m. ET, the stock was up 10% on the news.
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Coupang pulls a big profit lever
According to The Korea Times, Coupang is raising the monthly price on its Wow membership by 58% to $5.74 a month.
The move has attracted controversy for being overly aggressive, but should help beef up Coupang's profit margins and allow it to expand Wow benefits like free shipping, free returns, a streaming service, and free food delivery. The company finished 2023 with 14 million Wow members.
The move also seems designed to give Coupang an advantage against incoming competition from Chinese rivals like Alibaba.
Coupang has now nearly tripled the price of the Wow membership since it launched nearly three years ago, causing some subscribers to balk at the increase, but the company argued that Wow members save much more money than the cost of the membership.
What's next for Coupang
Coupang has embraced a similar e-commerce business model to Amazon and Prime has become a "core pillar" of Amazon's business. Indeed, it's hard to imagine Prime losing customers en masse even if Amazon raised prices aggressively.
Investors should be paying attention to see if Coupang gets much pushback, but the price for Wow still seems modest given its benefits. Additionally, investing in the service for long-term growth makes sense.
The e-commerce company seems to have a lot of potential, especially as it expands beyond Korea, and the price hike should add to profits and support future growth. Given that, it's not surprising investors are responding favorably to the news.
