Delivery application (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 renewed controversy over a dual pricing system and increased burdens on store owners, issues that surfaced during past free delivery competition.
According to the delivery and dining industry 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 stimulate consumption during a period of high inflation and high oil prices and to boost sales for business owners. 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 a slow period for the dining industry. Earlier last month, Coupang Eats submitted support for delivery fees for non-Wow members as a co-prosperity plan to the social dialogue body for delivery apps led by the Democratic Party of Korea's Euljiro Committee.
◇ Baemin sale wild card and a return to past success?
Industry watchers cite the "Baemin sale wild card" as the backdrop for this move. As Delivery Hero (DH), the German parent of Woowa Brothers, Baemin's operator, pushes to sell Baemin, with Uber and Naver mentioned as potential buyers, there are expectations that the battle for market leadership will reignite. A platform industry official said, "As this is a moment when the possibility of market reshuffling is coming to the fore, for Coupang Eats it could be an opportunity to increase its share."
The delivery app market has effectively been reshaped 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) were 24.09 million and Coupang Eats' MAU was 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 rumors of a Baemin sale gain traction and potential market changes are being discussed, Coupang Eats bringing back the free delivery card looks largely like a bid to preempt the market," adding, "It appears to be a strategy to raise its profile by expanding benefits to consumers."
Some in the industry also say Coupang Eats is dusting off 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 to serve as the trigger for reshaping the delivery app market from a Baemin–Yogiyo structure to a Baemin–Coupang Eats structure," adding, "Since it lifted its share through free delivery and single-order delivery, it appears to be pursuing a market preemption strategy again at a time when the possibility of market reshuffling is being discussed."
◇ Concerns about shifting burdens to store owners and consumers
Still, there is considerable concern in the delivery and dining industry about a rekindling of free delivery competition. The market already experienced controversy over a dual pricing system and increased burdens on store owners during a previous round of free delivery competition. Coupang Eats' decision to run free delivery benefits for regular members only temporarily through Aug. appears to reflect such concerns.
According to the Korea National Council of Consumer Organizations, a survey of chicken franchise prices last year found that delivery app prices averaged about 2,000 won higher than in-store prices. In some cases, the gap exceeded 5,000 won for certain menu items. As delivery app fees and advertising and delivery expense burdens grew, the practice of operating dual pricing, with separate delivery-only prices set by store owners, spread.
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 burdens on participating businesses, food prices, or membership fees," adding, "The fiercer the platform competition becomes, the more the burden of promotions and exposure battles will be shifted to store owners."
The Korea National Council of Consumer Organizations also said in a statement the previous day that "while a '0 won' delivery fee strategy may appear to benefit consumers 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 could 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, "As free delivery competition intensifies, the key issue will be who ultimately bears the cost burden," adding, "Since the dual pricing system also arose as the burden on small business owners increased, it is now more important to develop structures and co-prosperity measures that can reduce small business owners' burdens than to race over benefits."