"'Who Will Be the 'Ittala Delivery Person'... Wages Halved' Complaints About Free Delivery [Betrayal of Delivery Apps]"

②How Free Delivery Works
Last Year’s Basic Delivery Fee Changed to Tiered Delivery Fee
Delivery Fee per Order Reduced by Nearly 20%
"Cost Sharing Structured to Favor Delivery Apps"

Arithmetically, the costs that delivery applications (apps) must bear increase significantly due to free delivery. Before free delivery, the total delivery fee of 6,600 KRW (including VAT) was shared between the store owner and the consumer, but with the start of free delivery, the delivery app has taken on the cost that consumers used to bear (an average of 3,300 KRW).

[Image source=Yonhap News]

In particular, experts see that the cost borne by Baemin among the three major domestic delivery apps (Baedal Minjok, Coupang Eats, Yogiyo) is enormous. Unlike Coupang Eats and Yogiyo, which offer free delivery only to paid membership members, Baemin operates this for all customers.

Change in Settlement Method, Delivery Fee Reduced by 20%

Self-employed business owners and delivery drivers say that these costs are passed on through high commissions, delivery fees, and 'lowering delivery drivers' wages.'

In April last year, Baemin launched the Altteul Delivery (bundling multiple houses with similar routes for one delivery) service and changed the delivery fee settlement method paid to delivery drivers from a 'basic delivery fee' to a 'sectional delivery fee.'

The basic delivery fee is a method of paying fees by section according to the navigation-measured route. Up to 675m, 3,000 KRW is paid; from 675m to 1,900m, 3,500 KRW; and thereafter, an additional 80 KRW per 100m is paid. In contrast, the changed sectional delivery fee subdivides this payment. A pickup fee (1,200 KRW) and a delivery fee (1,000 KRW) are paid per order, and the sectional fee is paid at 80 KRW per 100m.

How has the wage of delivery drivers changed? Referring to the official Baemin Connect app, it appears that the delivery fee received by delivery driver A decreases by nearly 20% under the same conditions.

Assuming delivery driver A visits two destinations sequentially, one 1.5 km and the other 2.0 km from the store, the income from the basic delivery fee is 7,000 KRW, applying 3,500 KRW for each section fee. In contrast, calculating with the sectional delivery fee, even when adding the pickup fee, delivery fee, and sectional fees, the total is 6,000 KRW. This means the delivery fee per order falls by about 14.3%.

However, the actual wage decline experienced by delivery drivers is expected to be more severe. Arithmetically, losses due to the sectional delivery fee occur more significantly the closer the destinations (Delivery 1 and 2) are, and since Altteul Delivery bundles similar routes, it is common for destinations to be placed within 0.5 km of each other.

Hong Chang-ui, chairman of the Delivery Platform Union, explained, "Except for special situations such as bad weather, Baemin arranges destinations to be within 0.5 km of each other, and in this structure, losses caused by the changed fee system are much greater. Additionally, promotions paid during peak times or bad weather have decreased, causing delivery drivers' wages to drop significantly."

The fact that more 'order calls' are concentrated on Altteul Delivery as Baemin started free delivery for Altteul Delivery users is also exacerbating the situation. From this year, the sectional delivery fee method has also been applied to Baemin's online grocery business, 'B Mart.'

As a result, some communities of delivery drivers have even coined the neologism 'Iddalla' (a self-deprecating term referring to basic fees in the 2,000 KRW range). Kang Seok-woo (42), who does delivery as a side job in Ansan, Gyeonggi Province, said, "Who would want to deliver when only calls with unit prices in the 2,000 KRW range flood in? Delivery drivers' wages have been halved. Many are now leaving, saying they will find other side jobs."

A Baemin representative rebutted, "You should not evaluate the changed fee system simply by looking at the basic fee. Since the changed payment method pays sectional fees from 0m, the overall wage per time for delivery drivers is actually considered to have increased."

Last Year’s Operating Profit 700 Billion KRW... 'Labor Costs' Reduced

Despite the domestic delivery market shrinking for the first time last year, Baemin recorded an operating profit of 699.8 billion KRW, achieving its best-ever performance. This was the result of increased sales and significantly reduced operating expenses.

Looking into the details, the most notable decrease was in 'outsourced service costs,' which account for the largest portion of Baemin's operating expenses. Outsourced service costs refer to labor costs paid to delivery drivers, mutual growth support costs, partnership benefits and service fees, and promotion costs during bad weather. The growth rate of outsourced service costs, which reached 138.7% in 2021, plummeted to 6.3% last year.

Experts point out that a 'power imbalance' inevitably arises in the process of sharing the costs of free delivery among delivery apps, self-employed business owners, and delivery drivers.

Professor Lee Bong-ui of Seoul National University Law School said, "Free delivery is a kind of promotional event targeting consumers, but the costs incurred must be borne by someone among delivery apps, store owners, and delivery drivers. In the process of deciding how to split these costs, the logic favorable to delivery apps, which hold superior power, will inevitably be reflected."

Choi Soo-jung, a research fellow at the Small and Medium Business Research Institute, said, "The delivery app market can be considered sufficiently monopolized. It appears that delivery apps have excessively passed on the costs of free delivery to self-employed business owners and delivery drivers by using their superior bargaining position."

Series Order

<1> Self-employed Business Owners Losing Money the More They Sell
<2> How Free Delivery Works
<3> Cries Emerging from Various Places
<4> Yet the Reason They Have No Choice but to Use the 'New Fee System'
<5> Superficial Fair Trade Commission Voluntary Regulation
<6> Expert Suggestions: Delivery Platform Regulation Measures