December 7, 2022

Why food delivery apps are thriving in Korea


The Covid-19 pandemic has been a tragedy for humanity but a boon for food delivery platforms. In Korea, food and beverage sales worth 17.3 trillion won (US $ 14.58 billion) occurred on these apps in 2020, compared to 9.740 billion won (US $ 8.21 billion). the previous year. Since this public health crisis is not in sight, growth in 2021 remained strong according to multiple estimates including one from the national daily Donga ilbo.

No wonder the CEO of German company Delivery Hero, Niklas Oestberg, recently presented Korea as the opposite of Germany, where the company has struggled to make a dent.

Delivery Hero owns Baedal eui Minjok 배달 의 민족 (“Delivery Nation”), often referred to simply as Baemin. It is Korea’s biggest food delivery app.

At its home base in Germany, the company announced last week that its local delivery app Foodpanda was leaving six major German cities and limiting its operations to central Berlin. Officially, the firm justified the downsizing on the grounds that “the landscape of the German market has changed considerably”. In fact, Oestberg has not shied away from criticizing the current draft proposal in the European Union that will see workers in delivery and transit applications become real employees.

If this becomes law, the costs for companies like Uber and Delivery Hero, which insist that service providers on their apps are freelancers, will skyrocket after you factor in salaries, benefits, benefits, wages and salaries. insurance and even pension contributions.

Only a few Korean media picked up Oestberg’s tweet in the Korean market, but it created a wave on social media: highlighting the sheer volume of delivery activity in Korea compared to Germany, Oestberg has unwittingly but correctly hinted that Korean lax labor rules are good for his business.

But weak regulations allowing the hiring of freelancers as freelancers are not the only reason the industry has been successful in Korea.

The demand for food delivery services is only growing, fueled by the global epidemic, consumer behavior and demographic change.

Since the start of the pandemic, it’s shocking to go to bustling areas of Seoul – let’s say Gangnam – and see an army of bikers filling the streets every hour with packaged food in their hands. Data from the Ministry of Employment and Labor for November showed that 2.2 million, or 8.5% of employed Koreans aged 15 to 69, now make a living through online platforms. Of these, about 30 percent (660,000 people) work in delivery and transportation.

Certainly, the relentless spread of the Coronavirus is a clear factor for the normalization of this concert economy. While interested, this fascinating graph from a shared kitchen rental service shows that the time Koreans spent on the Baemin app closely mirrors the number of confirmed cases nationwide (interested because the company uses the data to convince potential restaurateurs that they shouldn’t be opening real restaurants but saving money by preparing food in a shared kitchen just for delivery).

Ghost Kitchen, a shared kitchen rental service, displays in red the number of confirmed cases of Covid from May 2020 to June 2021, and in turquoise the time Koreans collectively spent on the Baemin food delivery app during from the same period.

But one could argue that the Korean market has always been prepared for a thriving food delivery culture.

Koreans have long been pampered by affordable delivery options. When shopping online, a flat fee of 3,000 won ($ 2.5) is enough to get a package from almost anywhere in the country (that was an even more ridiculous amount of 2,500 won). Free shipping is usually included when you spend more than 50,000 won.

Coupang, famous for its “Rocket Delivery” service, works like Amazon Prime. Pay a monthly fee of 2,900 won and receive any qualifying item the next day free of charge for shipping, regardless of order size. Several online grocery sites also offer next day delivery, and these boxes regularly arrive early in the morning (my parents in Seoul already received theirs at 2 a.m.).

Even home cooked food delivery was nothing new when the two biggest apps, Baemin and Yogiyo, launched in 2011. Koreans’ beloved fried chicken has long been considered a delivery dish (although it is just as acceptable even to dine out). Chinese food like black bean noodles and fried pieces of pork dipped in sweet and sour sauce is another standard dish to order over the phone.

In small businesses, traders traditionally call nearby restaurants and organize simple lunches to take to stores, even to this day.

The range of food that one can order on Korean delivery apps is admittedly impressive when seen by foreigners.

Such long-standing conveniences naturally translated into a desire for an even better option like the now common applications. True to the Korean reputation for bbali-bbali 빨리 빨리 (fast, fast), “Consumers want the speed rather than the taste of the food delivered,” a June analysis said.

“The most common expression consumers used on social media last year regarding delivery was ‘fast’, up 48.2% from the previous year. This was a bigger jump as the increase in how often they used the phrase “delicious,” to 38.8 percent. “

It makes sense. Korea’s many apps offer a wide array of culinary choices, but burger and fried chicken still top the rankings for most favorite delivery dishes (meaning people aren’t necessarily drawn to novelty or variety. ).

In a notable change, standard Korean food (hansik 한식) replaced fried chicken in second place last year. This probably reflected the desire of consumers to eat the familiar Korean dishes they once had in restaurants, now that they couldn’t go out so easily.

What Korean would, however, order Korean food to eat at home rather than prepare it?

This article from Daily pop, an online medium specializing in the so-called “solo economy”, that is, one-person households, is enlightening. In one country, the proportion of people living alone has steadily increased to exceed 30 percent in 2019, “the need for food delivery has increased dramatically due to the increase in the number of one-person households “.

The share of one-person households in Korea exceeded 30%, or six million, for the first time in 2019 (Source: Statistics Korea)

Despite the small sample size of less than 400, an August survey cited by the newspaper Joongang ilbo gives an idea that more and more Koreans are willing to spend their money on food delivery because they are alone. According to her, the fewer people there were living in a household, the more they tended to be satisfied with ordering food on delivery platforms.

Seeing the potential in Korea, Delivery Hero finalized the acquisition of the company that operates Baemin in October (Delivery Hero previously owned Yogiyo, the second largest food delivery app in Korea, but had to sell it as a condition of purchase. de Baemin imposed by the Korean Fair Trade Commission (KFTC); the government feared a potential monopoly if Delivery Hero controlled both apps).

Not that everything is going well for the German company or the food delivery industry as a whole.

Fried chicken, served as is or topped with a spicy sauce, is popular in Korea and often ordered online for home delivery.

Delivery people, legally classified as freelancers, began to organize so they could get better pay and better working conditions from large delivery applications. The KFTC has gradually taken a hard line on the platforms’ business practices and self-drafted terms of service that favor them. Yogiyo, for example, came under fire last year after banning its partner restaurants from selling cheap food in other ways.

The government has also defined delivery men as essential workers, giving them more leverage in negotiations with management. A law specifically designed to protect concert workers is making its way through the National Assembly.

Ironically, the popularity of food delivery has only weakened the hand of apps: an increasing number of companies, including Coupang, have entered the market and there is now a shortage of delivery people. Salaries naturally increase.

And more importantly, these apps are losing money. Sales have gone up, but so have costs, as more players seek a piece of the pie.

Koreans’ appetite for on-demand food isn’t expected to wane, but it’s unclear how Delivery Hero and his ilk will monetize this situation. Personally, I prefer to call the restaurant and place my order directly so that no one has to pay any fees to these platforms.

Cover: Marco Verch via CC Null, CC-BY 2.0