Baemin·Yogiyo, Get Ready

Latecomers Launch Full-Scale Offensive... Delivery App Market Turns into a Battleground

[Asia Economy Reporter Kim Cheol-hyun] The prolonged COVID-19 pandemic has turned the delivery application (app) market into a battleground. With social distancing becoming a daily routine and the time spent at home significantly increasing, the demand for delivery has surged, intensifying the offensive of latecomers aiming to secure users. Public delivery apps that have drastically lowered their fees are also gearing up for launch one after another. As a result, cracks have appeared in the previously solid market structure centered around the leading apps. Baedal Minjok (Baemin), Yogiyo, and other top apps are now in a pressured position, but the market changes could positively influence the corporate merger review scheduled within the year, making their situation complex.

According to mobile big data platform company IGAWorks on the 17th, the total number of delivery app users (MAU) increased by 25% in August this year compared to last year. This result comes from analyzing 1.7 billion data points from 35 million mobile devices daily using an artificial intelligence (AI) algorithm. The number of delivery app users rose from 10,584,651 in August last year to 13,221,554 in August this year, meaning 2.64 million new users started using delivery apps within a year of the COVID-19 pandemic.

◆Cracks in the Delivery App Market Structure = What draws attention is that cracks have begun to appear in the structure dominated by Baemin, Yogiyo, and others. Baemin secured users in line with the overall growth, increasing from 8.28 million to 10.66 million during the same period. However, Delivery Hero, which acquired Baemin, did not achieve similar results. Yogiyo's user growth rate was only 11%, and Baedaltong actually shrank, losing more than half of its users and falling out of the top three. The vacancies are being filled by latecomers such as Coupang Eats and Wemakeprice O. Coupang Eats tripled its users and rose to third place in the market, while Wemakeprice O increased nearly sevenfold, firmly establishing its presence.

Industry insiders still view Delivery Hero, which acquired Baemin, as holding an absolute market share of over 90%, but they believe intensified competition could shake the market. For example, in the U.S., Grubhub held a 55% market share as the leader until 2017 but steadily declined to 28% as of March this year. Meanwhile, DoorDash surged from 13% to 42% during the same period, rapidly becoming the top player. The intensified competition prevented the initial first-mover advantage from being stably maintained. Regarding this, Lee Kyung-nam, a senior researcher at the Korea Information Society Development Institute, explained, "The food delivery service market has a high proportion of 'multi-homing,' where multiple providers use food delivery apps selectively depending on coupon issuance and marketing situations."

◆Intensified Pursuit by Latecomers = The pursuit by latecomers has become even fiercer. First, Coupang Eats is aggressively securing users through discount marketing strategies. After expanding its service across Seoul in June, it began targeting the Gyeonggi area last month. Moreover, Coupang Eats operates a system where one rider is assigned per order, not the 'combined delivery' method that handles 3-4 orders at once, and it has raised delivery fees to guarantee income for riders who cannot do combined deliveries. This indicates significant investment is being made.

Wemakeprice O has adopted a strategy to reduce the commission burden on registered small business owners and expand its service area. Starting from the 18th, it plans to implement a flat-rate program costing 8,800 KRW per week. Currently, it charges a brokerage fee of 5.5% including VAT, but as users increase, the burden on registered small businesses could also rise, so they have prepared an alternative. Wemakeprice expects this commission policy to create a virtuous cycle where the number of registered stores increases, naturally leading to more users. Ha Jae-wook, head of Wemakeprice O2O division, said, "Due to the nature of delivery services, many partners are relatively small-scale small business owners," adding, "We will become a delivery platform that seeks various ways to coexist and prosper in the mid to long term."

◆Full-Scale Offensive by Public Delivery Apps = Local governments are also preparing to launch public delivery apps emphasizing low fees for small business owners. First, the public delivery app 'Zero Delivery Union' (hereafter Union), led by Seoul City, opened its service on the 16th. Sixteen private delivery platforms participate in Union. Seven apps including Ddingdong, Meokkebi, Bureusim Zero, Seoul Ae Delivery, Nolreowayo Market, Mamma Meokja, and Ro Market started service on the day, and the remaining nine will join in November. The advantages include commission fees at 0-2%, no registration fees, and acceptance of Seoul Love Gift Certificates for payment. Consumers can receive discounts when purchasing Seoul Love Gift Certificates, and when paying with these certificates, businesses can reduce credit card payment fees from a maximum of 3% to 0.5%.

In Gyeonggi Province, a pilot public delivery app service will start in October in three cities/counties: Hwaseong, Osan, and Paju. They emphasize no advertising costs, a brokerage fee of 2%, and external payment fees ranging from 1.2% to 2.5%. Additionally, Gyeongbuk, Chungbuk, and Chuncheon City are allocating budgets and reviewing projects related to public delivery apps.

However, industry insiders believe that while the advances of latecomers may affect Baemin's corporate merger review, more time is needed for the actual market landscape to change. An industry official said, "The user gap is still large for latecomer apps to establish a competitive structure with Baemin and Yogiyo," adding, "Since Coupang and Wemakeprice are not primarily delivery apps, it will be difficult for them to continue investing to increase market share."