Delivery is on the rise as customers stay home

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Delivery is on the rise as customers stay home

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Lotteria’s delivery orders take up 35 percent of the total revenue this year.[LOTTE GRS]

On top of already stagnant growth for brick-and-mortar retail, the local spread of the new coronavirus is prompting consumers to further reduce their face-to-face interactions and providing a jolt to demand for food delivery and e-commerce.

Delivery food transactions in 2019 grew 84.6 percent from 2018, from 5.27 trillion won ($4.4 billion) to 9.74 trillion won, according to a Feb. 5 report published by Korea Statistics. By 2030, investment bank UBS expects the global online food delivery market to increase more than tenfold from 2018 numbers.

As more consumers are staying home to avoid the possibility of person-to-person transmission, the number of delivery app users in Korea increased 17.1 percent in the period from Jan. 27 to Feb. 2, compared to the week before. The number of delivery service users increased 5.8 percent over the same period.

Major retail and e-commerce companies are paying attention to the delivery market, expanding their own food delivery systems or acquiring related companies.

Lotteria’s delivery orders surged to take up 35 percent of the total revenue this year. To expand its delivery service in other dining brands, Lotteria’s operator Lotte GRS launched Lotte Eats, an app that provides delivery services of its five brands - Lotteria, Angel-in-us Coffee, Krispy Kreme Doughnuts, TGI Fridays and Villa de Charlotte. Users can choose “home service” for direct food delivery or “eats order” to order in advance for to-go service.

Meanwhile, the competition is intense to secure riders for food delivery services.

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E-commerce company Coupang’s food delivery service has relatively fewer orders than competitors Baedal Minjok or Yogiyo. As a promotional event to attract delivery riders, Coupang Eats temporarily increased its payment to 18,000 won per delivery in the Seoul area on Feb. 6. Since the average delivery cost per order is around 3,000 won to 5,000 won, Coupang Eats was giving 3.5 to 6 times the average delivery fee.

“Coupang increased the delivery commission fee to riders at the expense of losses,” Coupang said. “But we cannot disclose the exact amount we spent that day.”

And retail companies that lack food delivery networks are eying delivery agencies.

Shinsegae Group’s Emart was seeking to acquire a stake in start-up Mesh Korea, operator of delivery service Vroong, during preliminary bidding last Sunday. Although Mesh Korea claims to sell only parts of its shares, the entire company could be sold if conditions are met.

“We will decide whether to participate in the main bidding or not after examining the structure of the delivery service,” said an Emart official.

The investment banking industry says MBK Partners, the largest shareholder of Homeplus, is also interested in acquiring Vroong. Homeplus did not participate in the preliminary bidding for Mesh Korea.

The possibility of expanding business beyond food delivery services, using data from delivery apps, offers another incentive for retail giants to pay attention to the delivery services.

Car-sharing companies have already been following that model, putting their existing services to use with their data to create Grab Food, Uber Eats and Gofood.

“As the retail industry’s online and offline sector converge, each company is building its delivery service network,” said Seo Yong-gu, a Sookmyung Women’s University business professor. He added, “The size of the food delivery market will grow as the new coronavirus stimulates consumers to prefer non-face-to-face consumption.”

BY MOON HEE-CHUL [kim.yeonah@joongang.co.kr]

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