Food delivery companies are implementing faster order-by-delivery systems, but convenience comes at a price.
An emergency meeting was recently called at Woowa Brothers, the company that operates the Baedal Minjok food delivery app. It’s not that fewer deliveries are made on the app. According to market trackers Wise App, Wise Retail and Wise Goods, transactions on Baedal Minjok totaled 13.9 trillion won ($ 11.9 billion) in the January-September period, up 90% compared to the previous year.
Orders placed on the Baedal MInjok app in August surpassed 100 million for the first time, according to the company.
More and more people are ordering, but the problem of delivery costs remains.
Woowa Brothers introduced the Baemin One system in June, restricting runners to complete one order at a time. Delivery people receive a higher fee of approximately 6,000 won per order under the system. Previously, a delivery person was assigned multiple orders – usually five at a time – and delivered them all at once for an amount of between 3,000 and 4,000 won per order.
A passenger delivering an order means customers spend less time waiting for their food, and many are using the system. About 30 percent of orders on Baedal Minjok are placed through the one-order-per-driver system.
The company initially announced that it would receive a 12% brokerage fee and a delivery charge of 6,000 won per order – a cost that the restaurant and customers pay together, which is then handed over to the runner. However, Woowa Brothers has run an open-ended promotion that charges a free lower brokerage of 1,000 won per order and a delivery charge of 5,000 won.
The promotion reduces the delivery costs that restaurants and customers have to pay, thereby attracting more users to the app. But Baemin One runners must receive 6,000 won per delivery, regardless of the promotion, and the difference of 1,000 won is paid by Woowa Brothers.
Coupang Eats was earlier than the trend, launching the one order per delivery system for the first time in 2019. The app announced that it would receive a 15% brokerage fee and a 6% delivery fee. 000 won, but also offered a promotion. Its brokerage and delivery fees are on the same level as those of Baedal Minjok. The promotion was supposed to last three months, but continues today.
Although businesses find it difficult to cope with excessive promotions, they have no choice but to continue if they want to gain customers.
Coupang Eats financed itself with the help of Coupang Inc., its parent company in the United States. The U.S. company has issued shares three times this year – in April, July and October – to fund the Korean coupang with more than 910 billion won.
“Coupang and Baemin both fear that they will lose their competitiveness the minute they fail to take the lead in the new single delivery market, like what happened in the United States,” said an official working for a food delivery company. “Both companies will be frustrated with the increase in losses, but it will be difficult for them to stop promotions that are hurting them.”
San Francisco-based DoorDash has emerged as the leading player in the United States with a 55% food delivery market share in 2021 after implementing Own Delivery, a one-order-per-delivery system. Uber Eats follows with a 22% market share.
Some have expressed concerns about the future of the industry.
“Restaurants are angry with the high fees, but companies that operate food delivery applications are also suffering losses,” said Koo Tae-eon, an attorney at law firm LIN. “It means the market is not healthy.
BY LEE SOO-KI, LEE TAE-HEE [[email protected]]