June 14, 2022

Food apps battle for the larger e-commerce market


The new main page of the Baemin app, renewed in December, makes it easier for users to find services. [WOOWA BROTHERS]

Food delivery apps are getting creative in an effort to improve profitability as fierce competition threatens their chow-to-door model.

They are taking bold steps in general e-commerce – at least one is looking to become a “super app” that does it all and does it better – raising the possibility that this space, also cluttered and difficult, becomes even more so.

Baedal Minjok, the largest food delivery app, launched an e-commerce service on its Baemin app in mid-December. Now people can buy flowers, shoes and many other non-food items on the Baemin app.

Kim Beom-jun, CEO of Woowa Brothers, told an online conference last month that Baemin “will evolve into an e-commerce platform beyond a food delivery app.” Woowa Brothers is the operator of Baemin.

Yogiyo, the second-largest food delivery app, launched a monthly subscription service in November, offering discounts on food deliveries for people who pay 9,900 won ($ 8.8) per month.

GS Retail, which acquired Yogiyo with a consortium in August, is committed to becoming one of the leading rapid commerce providers by generating synergy between Yogiyo’s online service and 16,000 GS Retail stores, which range from convenience stores to supermarkets.

The expansion of the service came as food delivery apps faced intense competition from the arrival of new players, like Coupang Eats in 2019 and Shinhan Bank’s Ttaenggyeoyo, deployed this month.

More and more food delivery apps and consumer demand for faster deliveries have resulted in passenger shortages. If the number of passengers cannot be increased and economies of scale cannot be realized, they may have no choice but to provide services other than food deliveries to improve profitability.

“Similar to Coupang’s entry into the food delivery market, existing food delivery players are expanding into commerce to protect and grow their business by increasing the number of users,” said Jung Yeon- sung, professor of commerce at Dankook University.

In January 2021, Baemin held 65.99% of the food delivery market, followed by Yogiyo, with 17.86%, and Coupang Eats, with 13.56%, according to data from Global Bigdata Research.

Lifestyle platform

In recent years, Baemin has deployed various lifestyle services, such as B Mart fast trading and live trading. Live commerce is similar to shopping at home, but it is streamed online and allows viewers to chat with hosts in real time.

And it launched its e-commerce service, allowing users to purchase a more diverse range of products, including skin care products, sneakers, and flower bouquets.

The pilot service went live in mid-December and is currently only available in Gangnam, south Seoul. Aritaum cosmetics brand, Kukka flower brand, and Orga foods are some of the brands that sell on the Baemin app.

Companies deliver products directly to consumers. Baemin charges a commission to the sellers.

Baemin redesigned the app’s main page in December to make it easier for users to find services other than food delivery. Previously, images of different food categories were displayed on the main page. The goal of the new main page is “to make it look like a portal,” said Kim Yong-jun, director of products at Woowa Brothers.

Baemin aims to “improve customer accessibility by offering a diverse range of services on a single application,” said Park Sang-hun, spokesperson for Woowa Brothers. “People who clicked on the app to order food can also order essentials, or vice versa.”

Yogiyo grows through partnerships and an emphasis on fast trading.

In November, Yogiyo launched a monthly subscription service that offers discounts on shipping and subscription fees for partner brands, including the music streaming app Flo and the over-the-top service Watcha. It also partnered with KB Kookmin Card this month to create a credit card that offers discounts at cafes, convenience stores, and family-run restaurants.

“Yogiyo is expanding its partnerships to offer membership-based subscription services, which other food delivery apps don’t,” said Choi Hyun-jin, spokesperson for Yogiyo. “We are aiming to be a ‘super app’.”

The super app would provide a variety of seemingly unrelated services on a single mobile interface.

Yogiyo is also expected to strengthen the speedy delivery. With the acquisition, GS Retail has announced its intention to “provide an impressive assortment of products for rapid commerce” by integrating Yogiyo’s online platform and GS Retail’s 16,000 stores, which include GS25 convenience stores, GS The Fresh supermarkets and lalavla health and beauty stores. He said he plans to become the # 1 fast trade service provider “instantly”.

Reason for expansion

Expansion of services has been inevitable for food delivery applications as they seek to diversify their profits at a time of increasingly fierce competition.

Although food delivery grows by double digits every year, profits do not increase as the market expands due to heavy marketing expenses and increasing pressure to get food delivered quickly.

Baemin reported an operating loss of 36.4 billion won in 2019, the year Coupang Eats was founded, compared to an operating profit of 52.5 billion won the year before. Baemin continued to post a loss last year – 11.2 billion won – on sales, which rose 94% year-on-year.

Yogiyo and Coupang Eats did not disclose their income.

Competition has intensified since Coupang Eats entered the market with a unique home delivery system.

Under the system, passengers deliver one order at a time, rather than multiple orders, in exchange for a higher payment. The goal is to keep the food fresh, but this has resulted in a shortage of delivery people and higher delivery costs.

Baemin “faced a sense of crisis because we could fall behind in the market if we did not embrace the single delivery system,” said Park of Woowa Brothers. “So we adopted the system in June, and yes the decision was affected by Coupang Eats. We had no choice because the market has changed dramatically. It is costing us dearly, and I think it will be the same. thing for Coupang Eats. ”

Park added that Baemin loses between 1,000 and 1,500 won per delivery. Coupang Eats declined to comment on the matter.

Yogiyo has not adopted the one-stop delivery system. He said he currently had no plans to do so, saying the system seemed “unreasonable” because of its cost.

“Although we started out as a food delivery app, our goal is to become a lifestyle platform as it is more useful in attracting and locking users to our app,” Choi added.

BY JIN MIN-JI [jin.minji@joongang.co.kr]