Kakao causing stir for expanding food delivery biz

By Jun Ji-hye

Kakao is facing criticism from startups operating food delivery apps for working to expand its food delivery business to almost all restaurants.

Seen is Kakao's screen allowing users to order chicken from chicken franchiser BBQ. Kakao is currently offering food delivery service mediating the delivery of products from large-scale franchises, but is planning to expand the business to small- and medium-sized restaurants, provoking resistance from O2O startups operating food delivery apps.

The operator of the nation's dominant mobile messenger KakaoTalk began to operate its food delivery service mediating the delivery of products from large-scale franchises, such as chicken franchiser BBQ and burger chain Lotteria, in March last year.

Apparently after having confirmed the growth potential of the food delivery business for about a year, Kakao is now working to expand the business to small- and medium-sized restaurants selling snacks such as tteok-bokki (seasoned rice cake).

The company is currently accepting applications from small- and medium-sized restaurants that want to join the Kakao platform, according to a company official, Monday.

Online-to-offline (O2O) startups, including Seoul-based Woowa Brothers operating the nation's top food delivery app, Baedal Minjok, are reacting against the move from Kakao, saying the large firm, having platform and capital power, is moving to invade the market nurtured by the startups in recent years.

At the moment, the nation's food delivery app space is dominated by three _ Baedal Minjok, and RGP Korea's YoGiYo and Baedaltong. Kakao's business expansion is expected to break this three-way race.

“KaKao's expansion into the food delivery business would not help expand the nation's food delivery market but would only lead to erosion of market share,” said an official from a startup. “Kakao is not implementing a new strategy, but is just moving to use clients of existing apps.”

He said about 80 percent of the owners of restaurants are already using at least two apps, adding that a large company such as Kakao needs to show its willingness to seek mutual growth with small- and medium-sized firms rather than encroaching on them.

The official cited a case of the nation's largest portal Naver, which offers food ordering service by connecting the startups and users.

Another official claimed Kakao appeared to have changed its position as it had said a year ago that its food delivery business was only limited to large-scale franchises.

Kakao's food ordering and delivery service, which does not require users to install additional apps, is expected to have strengths thanks to its mobile messenger KakaoTalk that allows orders for food delivery and payment to be completed with just a few clicks.

“We have consistently received inquiries from owners of small- and medium-sized restaurants who want to enter the Kakao platform,” a Kakao official said. “We have decided to expand the business as they could be offered effective marketing channels through Kakao.”

The official added that the exact timing for the beginning of the new service has yet to be decided.