The demand for quick, ready-to-eat delivery food has surged significantly since the start of the pandemic. Now, it has become an indispensable culture in Korea. Delivery apps offer menus from big franchises to local restaurants with customizable options.
However, the delivery commission fees have recently been inching up an incline, now steeper than ever. This impacts not only customers who order food, but also small business owners offering delivery service.
Baedal Minjok, also known as Baemin, is by far the most used delivery app in South Korea. As of last month, Baemin took up to 33 percent of the total revenue of a delivery order, including the brokerage fee and Value-Added Tax (VAT).
The main reason for the rise in delivery fees is the structure of the fee rate system. With the recent popularity of “single-order delivery” among consumers, the supply of riders to meet the increasing delivery demand has become insufficient.
Single-order delivery is a method in which a rider processes only one order at a time, resulting in the reduction of delivery time while the fee escalates. Eventually, this led to the reorganization of the delivery platforms’ rate systems, which resulted in higher fees to consumers.
Yoo Jun-sang, who works as a delivery rider at a delivery agency The National Riders, observed significant changes after the increase in delivery fees.
“The actual delivery fees I receive have risen by about 10 percent per case, and the number of riders has also increased compared to the past,” Yoo said. “There is no significant change in the number of orders yet, but I think the recent rising fees have reduced the delivery demand, combined with the nature of the offseason.”
Meanwhile, consumers held different views on the issue.
Lee Seo-yeon, a freshman who resides at E-House, shared her point of view on the delivery fee increase. “Although the fee has been raised, the actual delivery time seems to be the same,” Lee said. “It’s unreasonable that I have to pay that much for the delivery fee even when ordering a meal. Nowadays, I take food directly from restaurants rather than using delivery apps.”
Consumers are not alone in such issues. Some small business owners are also struggling with high delivery fees. Due to the nature of singleorder deliveries, the revenue that returns to the owner is the price after payment of the order brokerage fee, payment agency fee, shopkeeperpaid delivery fee, and VAT.
The problem is that the order brokerage fees have increased alongside the delivery fee, leading to losses of customers and deficits for some store owners.
Park Beom-ik, the owner of the restaurant Beom’s Kitchen near the Ewha campus, agreed that small business owners were well aware of the exceptional fee increase in the recent few months.
Beom’s Kitchen has been available for delivery on Coupang Eats, Baemin, and Yogiyo, soon after its opening last November. According to Park, the main customers are students from nearby universities in the Sinchon area.
“In the beginning, the brokerage fee was a flat rate of 1,000 won, but now the system has changed so that the app takes 10 percent of the food price,” he said. “This naturally puts pressure on restaurant owners, considering the prices of our menus.”
According to Park, the delivery fee his customers pay for his food has also increased from 5,000 won to 5,400 won. Nonetheless, he mentioned that it is up to the owners to decide whether the customers fully pay for the extra money, or the owners themselves willingly chip in. If the whole increase of the delivery fee is left solely for the customers to bear, it may result in less orders overall. This presents the restaurant owners with a dilemma.
“Because the majority of the people who love Beom’s Kitchen are university students looking for a good meal at a reasonable price, I keep my delivery fees down to the minimum,” Park said. “I want to relieve the burden on my customers when they order from us.”