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2018-04-17 20:15
Restaurants' reliance on apps grows
By Lee Suh-yoon

Kim Pan-ho, a Chinese restaurant owner in Namdaemun, said he feels increasingly uneasy having to rely on digital delivery platforms.

Without them, his restaurant would not be able to attract young consumers.

The burden, however, is growing, as the platforms charge high sales commissions, eating into his restaurant's margins.

“Every day, 30 out of 80 delivery orders now come through apps,” Kim said.

“The platforms such as Yogiyo and Baedaltong barely leave any profit for restaurant owners. But I am too scared to complain because they could easily put me at a disadvantage in their search engine.”


An office worker uses the Yogiyo app to look for restaurants. / Korea Times photo by Lee Suh-yoon
Kim's restaurant uses all three major delivery applications _ Baemin, Yogiyo and Baedaltong.

They account for a third of all transactions in the billion won food delivery market.

Yogiyo, the second-biggest delivery app owned by Germany-based Delivery Hero, takes 12.5 percent of each transaction.

“There is a significant imbalance between delivery apps and small restaurant owners such as myself,” Kim said.

Digital food delivery services platforms have become ubiquitous amid the emergence of smartphones.

The apps started charging zero commissions. But this changed once they seized the market.

These platforms draw criticism as they are making a lot of money off of small food businesses that produce and provide services, while the apps do nothing.

Baemin, the biggest food delivery app, changed its strategy amid public outcry.

It replaced its 9.5 percent commission in August 2015 with a fixed monthly rate of 85,000 won.

Baemin, instead, has restaurants advertise their services on its platform.

The company's 2017 revenue from ads reached 150 billion won, equivalent to a 5 percent commission.

Baemin uses the so-called blind auction system to set its ad prices. This draws restaurants to bid and set high ad prices to increase their exposure on the platform.

Small restaurants pay up to 2 million won a month on average.

Baemin, however, said the public got the wrong impression on its ad service.

“According to a data analysis comparing ad prices with revenues, ads on our platform guarantee 50,000 restaurant owners gain 30 times returns on their initial investment on average,” a Baemin spokesperson said.

Delivery apps impose various other costs on restaurants, according to a report by the Ministry of SMEs and Startups last year.

For example, it has been difficult for restaurants to receive and see in-app delivery orders from consumers without using a special device that costs 70,000 won a month charged by the platforms, the report said.

Also, the apps have delayed transfers of in-app payments to restaurant owners by seven days on average.

Kwon Dae-soo, head of small business policy at the ministry, said his organization will announce measures by next month after consulting with the Fair Trade Commission.

sylee@ktimes.com

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