[비즈한국] Free delivery that does not pass on delivery app fees to 'customers' has been a hot potato. While lowering delivery costs is necessary to encourage customers to use delivery apps for payments, the problem has been a structure where costs, such as labor, are ultimately passed on to small business owners. This is the backdrop against which the Democratic Party of Korea (Euljiro Committee), platform companies like Baedal Minjok and Coupang Eats, merchant associations, and consumer groups formed a consultative body for social dialogue on the issue of passing on free delivery costs.
Against this backdrop, Coupang Eats has once again played the 'free delivery card.' Coupang Eats has decided to extend its 'free delivery' benefit, previously offered only to Wow members, to regular members for three months until this coming August. What is the reason behind Coupang Eats choosing such an aggressive, all-out war despite the expected criticism from political circles and the all-encompassing pressure from the government (Fair Trade Commission)? Industry analysts suggest that with the 'Baemin sale rumors' circulating, Coupang Eats aims to firmly secure the market in advance.
'Offensive' Begins Amidst Stagnant Social Dialogue on Delivery Apps
The delivery app social dialogue body is a consultative group launched in February last year by the Democratic Party of Korea with the goal of easing the burden of delivery fees and improving working conditions for riders. However, there have been no significant results from last year to this year. They failed to reach an agreement on a win-win plan, as merchant associations pushed back against the burden-easing measures proposed by the platforms, arguing, "Low delivery fees will eventually be passed entirely on to small business owners," and the gap between their positions remained unresolved. Since then, there has been no notable progress.
In the midst of this, Coupang Eats is restarting free delivery. It announced it would conduct a promotion to provide free delivery benefits to regular members until August to support consumption revitalization during this period of high oil prices and high inflation. Having rapidly increased its market share by providing free delivery services to Coupang Wow membership members in March 2024, Coupang Eats is now offering free delivery to 'non-paid members' as well.
The Democratic Party's Euljiro Committee immediately issued a statement of criticism. The committee criticized the move, stating, "Coupang Eats' so-called free delivery is a 'poisoned chalice' that passes costs on to merchants and is merely a promotional event for platforms to acquire members," adding, "Free delivery will result in deceiving consumers and increasing the burden on merchants." They also pointed out that Coupang Eats has gone back on its word after having officially submitted a 'temporary 1.5% reduction proposal for intermediate delivery brokerage fees' at the first meeting of the delivery app social dialogue body.
Aiming for 'Lock-in Effect' While Baemin Is Distracted?
Consequently, the analysis that this is a 'preemptive strike' with the potential sale of its competitor, Baedal Minjok (Baemin), in mind is gaining traction. Recently, the investment banking (IB) industry and others reported that the parent company, Delivery Hero (DH), is planning to sell Baemin for approximately 8 trillion won. Specifically, companies like Naver and Uber are being mentioned as potential buyers.
This is interpreted as a highly strategic choice to secure the market by maximizing the 'lock-in effect' of keeping even regular members tied to the service while Baemin carries out defensive management (such as raising fees and prioritizing profitability) to reorganize its structure and boost its valuation for the sale.
Analysts also suggest that government sanctions were taken into account. The Fair Trade Commission is currently investigating cases involving Coupang Eats' 'demand for most-favored-nation status' and 'bundling' where Coupang Eats and Coupang Play were sold bundled with Wow membership. In the case of the demand for most-favored-nation status, Coupang Eats recently applied for a consent decree. A consent decree is a system where if a company under investigation submits a voluntary corrective measure and the Fair Trade Commission accepts it, the case is concluded without confirming illegality. If free delivery is supported on Coupang Eats even without a membership, the bundle-selling structure centered on Wow membership effectively disappears.
The delivery app industry predicts that the intense 'chicken game' that occurred during the COVID-19 pandemic could restart this summer. An industry official said, "If Coupang Eats offers free delivery to regular members, Baemin will have no choice but to retaliate to protect its market dominance," adding, "Since this is an area that political circles have been monitoring closely, we will have to wait and see if the market order will change if Coupang's indiscriminate free offensive continues until August, or if they will again start a chicken game while accepting mutual losses."