Local governments get into the food delivery business

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Local governments get into the food delivery business

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The North Jeolla city of Gunsan’s food delivery app Baedal Myeongsu informs users that the system has crashed. [SCREEN CAPTURE]

Local governments are getting into food delivery. They see it as an important service, especially in a time of social distancing, and are also increasingly concerned about monopolization in the business.

Success has been mixed. Food delivery is more complicated than it looks, while the local governments face a backlash from people who believe the government should stay out and let companies provide commercial services.

Gyeonggi Gov. Lee Jae-myung suggested developing an app last week, benchmarking Baedal Myeongsu, which is offered by the city government in Gunsan, North Jeolla, and was launched last month.

Lee on Tuesday said he received approval from the city of Gunsan to use its public food delivery app in Gyeonggi.

Beadal Myeongsu doesn’t charge restaurants commissions.

Gwangjin District in eastern Seoul pulled together 500 million won ($446,000) last month to develop a similar app. The district promised to charge a commission rate lower than the rate charged by existing food delivery apps.

Initiatives of this sort are not unusual ahead of elections. Local governments have been especially motivated to do something after Baedal Minjok, the most popular food app in the country, revised its commissions.

The move drew heavy criticism, especially as it was made amid the Covid-19 crisis. It was also problematic, as the app’s owner is in a monopoly position after a major acquisition.

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Seongdong District in eastern Seoul is providing a delivery service until June to help small- and mid-sized businesses. [SEONGDONG DISTRICT OFFICE]

Gangbuk District in northern Seoul today initiated a service for the delivery of food from the Suyu Traditional Market, with 280 stores participating. The app providing the service is called Noljang.

Gimbap, sliced raw skate salad, marinated grilled beef and fruit are among the foods available for order.

Customers have stopped visiting the market since the Covid-19 outbreak, and businesses are struggling.

People who spend more than 30,000 won can get their order delivered for free in two hours or less.

The orders are delivered within a radius of 1.5-kilometer (0.93-mile) from the market.

“The mobile order and delivery service will greatly help vendors at the traditional market that have been hit hard by the prolonged Covid-19 outbreak,” said Gangbuk District Mayor Park Gyum-soo.

Seongdong District in eastern Seoul began a delivery service on April 1 without developing an app. It instead pays the wages of five delivery workers and three call center employees, who receive orders from food sellers.

The traditional Ddukdo Market is among the several areas covered.

“As consumer culture is becoming ‘untact,’ we’ll try to expand delivery from traditional markets to activate the market,” said the Seongdong District Mayor Chong Won-oh.



Doubts on sustainability

So far, Baedal Myeongsu in Gunsan is one of the most utilized public delivery apps. Released on March 15, it processed more than 6,000 orders as of Sunday. Despite popularity, it is hitting its limits.

On Tuesday, the app froze due to the surge in users. The server couldn’t handle the heavy traffic.

The app is designed for 1,000 to 2,000 simultaneous users. When the total hit 10,000, the system froze. Gunsan has a population of over 260,000. To avoid future crashes, the system has been upgraded.

People nationwide have signed up for the service misunderstanding its local nature. The number of users as of Tuesday stood between 50,000 and 60,000, many mistakenly thinking that it is a national service.



Government intervention

The self-employed are welcoming the release of public delivery apps.

When sending orders via Baedal Minjok (popularly known as Baemin) or Yogiyo, which is controlled by Baedal Minjok’s parent company, restaurants have to pay commissions. Public systems charge nothing.

“I hope public delivery apps are developed nationwide,” wrote a commenter on a community website for the self-employed. “Accepting local currency will help raise the public app’s competitiveness to be able to compete against Baemin.”

Another commenter wrote, “The public app will hopefully reduce pressure.”

Professor Choi Jae-boong, who teaches mechanical engineering at Sungkyunkwan University, argued that the government intervention could deter company growth.

“Spending patterns are changing, but the government criticizes [market change] with old stubbornness instead of trying to foster fair competition,” wrote Choi on Facebook. “How would young people feel? How would overseas capital watching Baemin think?”

In December, Woowa Brothers, the operator of Baemin, was acquired by the Berlin-based Delivery Hero. The Fair Trade Commission is still reviewing the acquisition.

“The public role is market supervision,” said Korea Startup Forum President Choi Sung-jin. “Market intervention should be minimized. Criticisms on commission charges of a private company should be handled with the market supervision.”

Kim Bong-jin, founder of Woowa Brothers, was the chairman of the Korea Startup Forum until February.

BY KIM HYUN-YE, KIM JUNG-MIN AND KWON JI-YE [jin.minji@joongang.co.kr]

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