Baemin Achieves Record-Breaking Performance, But Reasons to Worry Remain

Baemin Achieves Record High Sales and Profit Last Year
Mixed Outlook Due to Decline in Delivery App Users After Endemic

Sales of 2.9471 trillion KRW and operating profit of 424.1 billion KRW. These are the consolidated results announced recently by Woowa Brothers, the operator of Baedal Minjok (Baemin), for last year. Sales increased by 46% compared to the previous year, and above all, the company escaped the three-year deficit streak since 2019 to post a profit in the 400 billion KRW range. Both sales and operating profit reached record highs. This was the result of a threefold increase in delivery orders during the COVID-19 pandemic. However, opinions are divided on whether the profit trend will continue. Although the company posted its best-ever performance, there are openly expressed concerns that it cannot celebrate. This is because the number of delivery app users has been continuously decreasing since the endemic phase (endemic: an infectious disease established as a local disease). Baemin has also started preparing strategies to overcome this situation.

On the 4th, data company IGAWorks reported through Mobile Index that Baemin's monthly active users (MAU) on Android and iPhone (iOS) smartphones last month were 19.29 million. Compared to March last year, this is a decrease of 1.5 million users, or 7.3%, over one year. The total number of delivery app users was 22.39 million, down 8.5% from the same period last year. Baemin performed relatively well. Last month, Yogiyo and Coupang Eats had 6.7 million and 2.97 million users, respectively. Yogiyo saw a 24.1% decrease over one year. Coupang Eats lost 47.6% of its users.

The decline in delivery app users has intensified since the endemic phase. As users leave, transaction amounts are also decreasing. The industry explained that delivery app transaction amounts began to decline from the second half of last year. In fact, according to Statistics Korea, the online transaction amount for food services (delivery food) in January this year was 2.2295 trillion KRW, down 8.3% compared to the same period last year.

As market growth stagnates, delivery riders are also leaving. Statistics Korea reported that the number of employed persons in transportation and warehousing, which includes delivery riders, was 1.622 million as of February this year, a decrease of 44,000 compared to the same period last year. The economic environment surrounding the delivery market, including rising labor costs and inflation, is also challenging. The burden of delivery fees, shared by consumers and restaurant owners, is increasing, which is likely to act as a negative factor for delivery app companies. From Baemin's perspective, although the market size has shrunk, competition remains intense. They must compete not only with the second and third-ranked companies but also with franchise-operated delivery apps, public delivery apps emphasizing low commission fees, and bank delivery apps such as ‘Ttaenggyeoyo’. There are also ongoing rumors about the entry of giant IT platforms into the delivery market.

In response, Baemin has first introduced measures to prevent customer churn in the delivery market. A representative example is the launch of a new service called ‘Altteul Baedal’ (Affordable Delivery), which reduces the burden of delivery fees. The company is also driving its commerce business, which delivers all products customers want beyond just food delivery. To this end, it is expected to expand the product lineup of ‘B Mart’, a daily necessities shopping service. The ‘Baemin Store’ is also expanding its target to include general merchants. An industry insider said, "The delivery app market has shrunk compared to before, and the competition in the commerce market that Baemin wants to strengthen is very fierce. This year, which will determine how much Baemin can overcome the growth stagnation caused by the endemic, will be a turning point deciding Baemin's future."