Food delivery platforms compete with free delivery

The competition among Korea’s three largest food delivery platform operators is intensifying as each of them has recently launched free delivery services to increase their share of the market.

On Friday, Yogiyo, the third-largest food delivery app provider, announced that the company would begin free delivery for users with Yogiyo membership.

Yogiyo’s decision came after the other two companies, Baedal Minjok (Baemin) and Coupang Eats, rolled out membership-based free delivery services in recent weeks.

The first to start free delivery was Coupang Eats, the second-largest food delivery app in the country. On March 26, Coupang announced that the company would provide free delivery to customers with Coupang's paid Wow membership. On Monday, Baemin followed suit to not lose market share to its biggest rival.

“It would have been difficult for Yogiyo not to introduce free delivery service as the company’s market share could dip further,” an industry source said.

Yogiyo used to be the second-largest food delivery platform operator in the country. But, in March, the number of monthly users of Coupang Eats overtook those of Yogiyo.

According to local market tracker IGAWork’s data released earlier this month, Coupang Eats' number of monthly active users jumped 95 percent on-year to reach some 6.3 million, while the figure for Yogiyo dropped 22.5 percent on-year to 5.7 million.

The three companies' profitability has begun to drop after the COVID-19 pandemic, when the number of people using delivery apps reached its peak.

According to Statistics Korea, the value of digital payment transactions made on delivery platforms reached 26.6 trillion won in 2022. But the figure fell to 26.4 trillion won ($19.5 billion) last year, marking the first decline since the statistics agency started to collect related data in 2017.

As the competition escalates, there are concerns that restaurant owners may face an increase in the commission fees they pay on orders received through delivery platforms. Operators of these platforms attempt to offset the costs of maintaining their free delivery services by passing on expenses to restaurant owners.