Delivery app Coupang Eats has brought back its free delivery card. The free delivery service, previously offered only to Wow members (Coupang membership), has been temporarily expanded to regular members through Aug.
With the possibility of a Baemin sale being discussed, the industry interprets this as a strategy to preempt the delivery market. However, there is concern about the reemergence of the dual pricing controversy and increased burdens on store owners that surfaced during past free delivery competitions.
According to the delivery and dining industries on the 21st, Coupang Eats is running a "0 won delivery fee for every order" promotion for regular members through Aug. The move aims to spur consumption and boost merchants' sales during a period of high inflation and high oil prices. A Coupang Eats official said, "Coupang Eats will cover the entire customer delivery fee, and participating stores will be able to expand sales opportunities without additional expense." The summer vacation season is considered the off-season for the dining industry. Last month, Coupang Eats submitted support for delivery fees for non-Wow members as a win-win plan to the social dialogue body for delivery apps led by the Democratic Party of Korea Euljiro Committee.
◇ Baemin sale variable and past success experience
The industry cites the "Baemin sale variable" as the backdrop for this move. As Delivery Hero (DH) of Germany, the parent of Baemin operator Woowa Brothers, pursues a Baemin sale, with Uber and Naver mentioned as potential buyers, there is an outlook that competition for market leadership will reignite. A platform industry official said, "As this is a moment when the possibility of market restructuring is being highlighted, for Coupang Eats it could be an opportunity to increase market share."
The delivery app market has effectively been reorganized into a two-horse race between Baemin and Coupang Eats. The industry estimates Baemin's share of the delivery market at about 54% and Coupang Eats' at about 29%. According to the mobile data analysis platform Mobile Index, in Mar., Baemin's monthly active users (MAU) totaled 24.09 million and Coupang Eats' MAU 13.55 million. Coupang Eats surpassed 13 million MAU for the first time.
Lee Jong-woo, a professor in the Department of Distribution and Marketing at Namseoul University, said, "As talk of a Baemin sale has grown and the possibility of market change is being discussed, Coupang Eats' decision to bring back its free delivery card strongly reflects an effort to preempt the market," adding, "It appears to be a strategy to build presence by expanding benefits for consumers."
Some in the industry also interpret this as Coupang Eats reviving a past success. After Yogiyo was sold by DH, in 2021, Coupang Eats rapidly increased its share by pushing "single-order delivery" and free delivery for Wow members. A delivery industry official said, "It was enough of a turning point for the delivery app market, which had been a Baemin–Yogiyo system, to be reorganized into a Baemin–Coupang Eats system," adding, "Since it raised market share through free delivery and single-order delivery, it appears to have rolled out a market preemption strategy again at a moment when the possibility of market restructuring is being discussed."
◇ Concerns about passing costs to store owners and consumers
However, in the delivery and dining industries, there is considerable concern about a rekindling of the free delivery competition. They have already experienced the dual pricing controversy and increased burdens on store owners during a previous free delivery race. Coupang Eats' decision to run the free delivery benefit for regular members only temporarily through Aug. also appears to reflect such concerns.
According to the Korea National Council of Consumer Organizations, a chicken franchise price survey last year found that delivery app prices were on average about 2,000 won higher than in-store prices. Some menu items showed differences of more than 5,000 won. As delivery app commissions and advertising and delivery expense burdens grew, more store owners adopted dual pricing by separately setting delivery-only prices.
The dining industry says that while free delivery may look like a consumer benefit, the expense itself does not disappear. A dining industry official said, "The cost of free delivery is likely to be recouped in other ways, such as by placing the burden on participating businesses, food prices, or membership fees," adding, "The more intense platform competition becomes, the more the burden of promotions and exposure battles will be shifted to store owners."
The previous day, the Korea National Council of Consumer Organizations also said in a statement that "although the '0 won' delivery fee strategy may look like a consumer benefit in the short term, in the long term it will lead to increased burdens on participating businesses and higher dining and delivery prices," arguing that the cost of free delivery may ultimately be passed on to consumers directly or indirectly through food prices and membership fees.
Lee Eun-hee, a professor in the Department of Consumer Science at Inha University, said, "The hotter the free delivery competition gets, the more the key issue will be who bears the cost," adding, "Since dual pricing likewise arose as the burden on small business owners increased, it is time to prioritize building structures and win-win measures that can reduce the burden on small business owners over benefit competition."