Food delivery fees rose but customers say, 'Enough!'

Home > Business > Industry

print dictionary print

Food delivery fees rose but customers say, 'Enough!'

A delivery rider delivers food in Seoul. [NEWS1]

A delivery rider delivers food in Seoul. [NEWS1]

 
Customers are rebelling against expensive delivery fees for takeout food — and defecting to up-and-coming delivery apps that charge less.
 
Restaurant delivery services like Coupang Eats and Baedal Minjok had a very good pandemic, the perfect example of a digital technology whose time had come. Never had ordering in been more necessary, and they eagerly stepped up to the plates. Service charges were customers' least concern.
 
“Restaurant delivery businesses enjoyed high growth during the Covid-19 pandemic because a lot of people ordered in,” said Oh Ji-woo, an analyst at eBest Securities. “They were working from home or they had students taking online classes.
 
"But customers started to become tired of delivery costs that rapidly increased, and overall delivery demand is falling.”
 
According to Wise App, an application market tracker, there were 4.37 million monthly active users of Coupang Eats in June, down 33.4 percent from March, when social distancing restrictions were still in place. The restrictions were all lifted in April.
 
Monthly active users of Yogiyo fell 16.4 percent during the same period, and Baedal Minjok’s fell 3.6 percent. Combined transactions on the three companies’ delivery applications was 1.87 trillion won in June, dropping 21 percent compared to March. 
 
Users have been shunning high delivery fees, which were cheap at the height of the pandemic. But the apps have boosted commissions charged to restaurants, and restaurants have to decide how much of the higher commissions to pass along to their customers.
 
“I remember delivery fees ranging between 2,000 to 3,000 won a year or two ago, and a lot of restaurants offered free deliveries back then,” said Shin Ye-ji, a 27-year-old living in Seoul. “Now, I see restaurants charging 5,000 to 6,000 won and I just don’t order that much because there’s no way I’m paying around one-third the cost of my meal in delivery fees.”
 
Coupang Eats and Baedal Minjok used to charge a 1,000-won ($0.75) commission and a 5,000 won delivery fee, which could be pricier during busy times such as lunch and dinner. Since March, the two apps have been charging a commission of between 8 to 15 percent per order. Some restaurants have passed along the higher commissions to customers in the delivery fees.
 
Based on research conducted by Korea National Council of Consumer Organizations, 21 percent of restaurants that use the three major delivery apps — Baedal Minjok, Yogiyo and Coupang Eats — raised their delivery fees in July compared to May. Delivery fees remained the same, however, for 73 percent of the restaurants. 
 
Smaller delivery apps offer the same service at a lower price, and they are becoming a cheaper option. Delivery fees are lower on those apps because they charge a lower commission to restaurants. 

 
Ttaenggyeoyo, a restaurant delivery application created by Shinhan Bank in January, had 157,000 monthly active users in June. Although small compared to the Big Three, the figure jumped 141.5 percent compared to March.
 
Unlike the Big Three, it only charges a 2 percent commission to restaurant owners and doesn’t charge advertisement fees. Restaurant owners pay advertisement fees to Coupang Eats and Baedal Minjok for their restaurants to appear higher up in the app’s search results.
 
Left: a screen grab on Ttaenggyeoyo shows a restaurant selling pork and rice soup charging 2,900 won for delivery fees. Right: The same restaurant on Coupang Eats charges 3,900 won for delivery fees. [SCREEN CAPTURE]

Left: a screen grab on Ttaenggyeoyo shows a restaurant selling pork and rice soup charging 2,900 won for delivery fees. Right: The same restaurant on Coupang Eats charges 3,900 won for delivery fees. [SCREEN CAPTURE]

 
On Coupang Eats, a pork and rice soup restaurant in Yongsan District, central Seoul, set a delivery fee of 3,900 won for a minimum 15,000 order. Users of Ttaenggyeoyeo are charged a 2,900-won delivery fee for the same 15,000 won order at the same restaurant.
 
One reason Ttaenggyeoyo can charge such small commissions is its main focus isn’t to generate profits. Shinhan Bank says its goal is to use the application to collect customer spending data, which will help it come up with financial services that fit users’ spending tendencies.
 
Baedal Teukgeup, an application created by Korea Gyeonggi-do Company in 2020, is also gaining attention. The company is a public institution under the Gyeonggi Provincial Government, only offering services to customers in Gyeonggi and nearby neighborhoods in Seoul.
 
The app had 479,000 monthly active users in July according to market tracker Mobile Index, up 14 percent on month. 
 
It charges an even lower commission of only 1 percent and offers a 10 percent discount if the users pay using Gyeonggi Local Currency, a voucher issued by the Gyeonggi Provincial Government.
 
Although the 1-percent commission is the app’s only source of revenue, it is operated by a public sector company backed by government funding. Some 2.1 billion won was allocated to Korea Gyeonggi-do Company in 2020 to develop and operate the app. Another 13.7 billion won was given last year and 8 billion won is the budget for this year.
 
It also works as a channel to promote the local currency vouchers, a major project for the province.
 
Despite low commissions for restaurants and low fees for customers, the apps have a long way to go to beat the big players. 
 
Ttaenggyeoyo has a market share of 1.67 percent in the restaurant delivery market, and Baedal Teukgeup has 1 percent. The Korea Gyeonggi-do Company says the app has a 15 percent market share in Gyeonggi, but is still not close to the three major apps. Baedal Minjok has 57.7 percent of the market, while Yogiyo has 24.7 percent and Coupang Eats 17.5 percent. 
 
One thing that has been holding back the smaller apps is a lack of enthusiasm by restaurants.
 
In Ttaenggyeoyo’s fried chicken restaurant category, there were only 37 restaurants available for delivery when setting the location to Yongsan District. On Coupang Eats, there were 226.
 
 
 
 

BY LEE TAE-HEE [[email protected]]
Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
s
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)