| Hello Nature's delivery vehicles are parked outside the logistics center in Bucheon, Gyeonggi Province. Courtesy of BGF Retail |
By Kim Jae-heun
A growing number of e-commerce companies are ending their costly overnight delivery services as the nation recovers from the COVID-19 pandemic, according to company officials, Monday.
Over the past two years, Coupang, Market Kurly, SSG.com and others expanded their quick delivery services, bringing online purchases to consumers early in the morning. Many customers have been using the service as they deliberately stayed home most of the time so as to reduce the chances of contracting the highly contagious virus.
However, overnight delivery requires huge investments in logistics centers and labor expenses. Companies have to pay night-shift workers double the salary of daytime employees.
In Korea, with more e-commerce firms launching the same overnight delivery services, the market competition keeps intensifying ― making it harder for online grocery services to make a profit.
Lotte ON, the second mover in the online business, decided to wash its hands of overnight delivery as of Sunday.
“To utilize our limited source and manpower, we have decided to focus on 'quick commerce,' which delivers online purchases within two hours. It will allow us to reduce excessive packaging and carbon dioxide emissions,” said an official of Lotte Shopping, which operates Lotte ON.
BGF Retail, an operator of the organic food delivery service Hello Nature, is also terminating its morning delivery services at the end of May.
“With larger retailers jumping into the overnight delivery market, the competition became severe. We have made a quick decision to end the service in response to the imminent end of the pandemic,” a BGF Retail official said.
Currently, only Oasis is making a profit from overnight service and other firms like Coupang and SSG.com are accumulating losses. Last year, Coupang saw its operating losses triple to 1.8 trillion won ($1.45 billion) from 621 billion won in 2020.
Market Kurly, which introduced Korea to overnight delivery for the first time in 2015, saw its losses skyrocket year-on-year by 87.3 percent in 2021 too.
However, Market Kurly said it will continue strengthening its delivery service.
“We have the capacity to operate our overnight delivery service efficiently based on our largest cold-chain delivery system. We will actively beef up our business in the market so that our latest delivery technology can expand further in the e-commerce industry,” a Kurly official said.