Delivery App Trio Launches Tangible Delivery Fee Reduction Strategy
User Numbers Drop in Third Week of May Compared to First Week
May Take Time to Gain Traction in Market
The 'delivery fee war' among delivery applications (apps) has started again. During the COVID-19 period, as the market expanded, delivery apps competed to lower delivery fees through various promotions to secure delivery riders and users. However, the current delivery fee war looks quite different. It is not about acquiring more users but about retaining users who are leaving. This is a self-help measure chosen amid a situation where the number of users is declining due to the overlap of endemic (periodic infectious disease outbreaks) and high inflation. According to a recent survey by Open Survey, 83.9% of respondents who said they reduced their use of delivery services answered that it was because "delivery fees have become expensive." Companies' plan is to prevent the market from shrinking by reducing the burden of delivery fees. However, since delivery fees involve restaurant owners, riders, and users, it is expected to take time for the strategies introduced by each company to be effective in the market.
On the 1st, data company IGAWorks reported that according to Mobile Index data, the weekly active users (WAU) of Baedal Minjok (Baemin) from the third week of last month, May 15 to 21, was 13.03 million. During the same period, Yogiyo and Coupang Eats had 3.46 million and 1.57 million users, respectively. Compared to the first week of May, Baemin's users decreased by 4.4%, Yogiyo by 5.2%, and Coupang Eats by 2.2%. This means that the effects of the delivery fee reduction strategy competition, which began in earnest in May, have not yet appeared.
Last month, delivery app companies simultaneously announced measures to reduce delivery fees. Baemin expanded its 'Altteul Delivery' service area to Seoul, following Incheon and Daegu. This service lowers the delivery cost burden for restaurants and consumers by having Baemin directly deliver single orders and optimally bundling deliveries along the route. It is expected that consumer costs will be reduced to around 2,000 won.
Yogiyo introduced a subscription service called 'YogipassX' that offers free delivery benefits. For a monthly fee of 9,900 won, users can enjoy free delivery when ordering at least 17,000 won from stores with the 'YogipassX' badge. Coupang Eats offers linked discount services to customers subscribed to Coupang's 'Wow Membership.' Coupang members can receive discounts on menu prices at partner restaurants equivalent to the delivery fee burden. This strategy aims for a 'lock-in effect' to retain loyal customers.
Industry insiders expect that it will take time for these strategies by each company to show effects in the market. For instance, Baemin's Altteul Delivery started in Gwanak-gu, Seoul, and only expanded to 10 additional districts, including Seocho-gu, on the 24th of last month. It is expected to take another month to expand the service area to all of Seoul and major metropolitan cities. Yogiyo's free delivery subscription service also started in mid-last month, and it is still too early to assess its market impact.
An industry official said, "Delivery fees are a sensitive issue for other stakeholders in the delivery ecosystem, such as riders, so simply lowering fees is not necessarily the answer," adding, "Each company's strategy to reduce the perceived delivery fee burden by users is still in the early stages of implementation, and it will take time for these to settle in the market and for the service areas to expand."
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