Baedal Minjok's new fee system unwelcomed by restaurant owners
A Baedal Minjok delivery man rides a scooter to deliver orders in Gangnam, Seoul, on Jan. 22. / Korea Times photo by Koh Young-kwon
By Kim Jae-heun
The country's No. 1 food delivery service operator, Baedal Minjok (Baemin), acquired by Germany's Delivery Hero, recently introduced a new fee system for advertisement on the mobile application.
Baemin said it has lowered its commission fee for advertisements by 1 percentage point to 5.8 percent per order made through its application platform. Previously, it charged a 6.8 percent of commission.
However, restaurant owners argue that the new guideline will push them to pay more for ads and that their costs have nearly doubled.
Previously, restaurant owners have mainly used the “Ultra Call” advertisement service, a flat sum system that charges 88,000 won per month. With this service, store owners can plant as many flags as they want on a virtual map created on the application platform and customers will be recommended with restaurants closest to their current location. Flags are used to locate restaurants' locations but Baemin allowed store owners to buy as many addresses as they want to maximize its advertising revenues.
Starting from Monday, however, Baemin has restricted restaurants to planting a maximum of three flags and has started a new advertisement system called “Open Service.” Previously a similar system showed the names of recommended restaurants on the mobile screen beneath the “Ultra Call” category.
Now that Baemin decided to put the “Open Service” category on top of “Ultra Call” section, restaurant owners have to pay for the new advertisement system because people often order with the very first restaurants that appear on top of the screen.
A barbeque restaurant owner surnamed Lee in Seongsu-dong, eastern Seoul, said he had paid 2.1 million won per month for using Baemin's platform before; however, according to the new guidelines by Baemin, he has to pay double the amount because he cannot use the “Ultra Call” system alone.
Specifically, Lee would plant 24 flags on the virtual map, which cost him a little over 2.11 million won. For the “Open Service” system, he has to pay a 5.8 percent commission for total sales made through Baemin. Lee, who averages a 70-million-won-per-month turnover, will now have to pay 4.06 million won to use the “Open Service” advertisement system.
Baemin said the new rate pricing system is only charging more to those “rich store owners” and 52.8 percent of platform users will benefit from the changes. An average fried chicken restaurant that makes 30 million won per month paid 270,000 won to 350,000 won for advertising fees to Baemin before the change. It would pay a maximum of 1.7 million won with the “Open Service” system.
Baemin's commission fee increase was expected after the German company Delivery Hero decided to acquire the company last year. Baemin already has a 55.7 percent market share, followed by Yogiyo and Baedal Tong that collectively have 44.3 percent market share.
The Delivery Hero's acquisition plan is subject to approval from the country's top anti-trust regulator. The regulator has asked Baemin to present detailed measures on how to protect the best interests of smaller market players as the acquisition deal, once it is done, will help Baemin take a dominant position in South Korea's food delivery sector.