Naver may delay food delivery service launch
A deliveryman picks up a food order from a restaurant and walks to his scooter in Seo-gu, Gwangju, on July 19. / Yonhap
By Kim Jae-heun
By Kim Jae-heun, Kim Yoo-chul
Naver, the country's dominant web portal, is considering delaying the official launch of its food delivery service business after Korea's top antitrust watchdog fined it 1 billion won fine for allegedly abusing its online platform supremacy in terms of limiting fair competition in the real estate data segment.
The COVID-19 pandemic has brought massive changes to many industries ― both positive and negative. The food delivery service is one sector that has largely benefited in its market size, reportedly growing larger in value from last year's 20 trillion won thanks to the trend of contactless transactions.
The bright outlook for this market is attracting new players ― possibly even IT firm Naver ― creating even more competition in the burgeoning industry. Given the lucrative market potential, Naver is said to launch its own food delivery business through strategic partnerships or on its own.
In response to its foray into the food delivery service, a Naver official said the tech company will try to collaborate with companies that are doing well in their own sectors. “It is our corporate philosophy to do what we are good at.” Naver does not directly operate a food delivery business.
Two years ago, it launched an online platform offering food delivery services for 28 traditional markets in Seoul and Gyeonggi Province, in collaboration with a startup called Freshmentor. The startup processes the food orders for delivery, while Naver simply provides the sales platform.
Similarly in 2019, Naver also launched the “Smart Order” service to place online orders for pick-up service from registered restaurants. It said it will continue to stay away from joining the food delivery service.
An industry source said Naver could join the market anytime and it would be a matter of time before it became the dominant player if it were to start expanding its associated businesses aggressively.
“Naver and Kakao own platforms that are easily accessed via smartphones. If they make investments to start delivery services, it would bring chaos to the industry. There is no guarantee that current market leaders will keep their position,” the source said.
On a related note, in April Naver's Japanese subsidiary Line acquired Demae-can, the top delivery service in Japan. Line, together with Naver J.Hub, raised 30 billion yen to secure 60 percent of Demae-can's shares. Naver J.Hub is a Japanese business investment company that is owned 100 percent by the Korean IT firm.
Line already owns its delivery player Delima and its acquisition of Demae-can has put the internet firm in a dominant position in the food delivery market there.
Naver denied its connection with Line's delivery service business in Japan and any possibility of starting a similar service here.
“Line is an independent corporation and their business has nothing to do with ours,” a Naver official said.
As the source said, Naver is “ideally positioned” to expand into other businesses. However, the Korea Fair Trade Commission (KFTC) is worrying over Naver's growing platform monopoly, which it may decide hits the best interests of local small- and medium-sized enterprises (SMEs), the policy of which is strongly backed by President Moon Jae-in and his Cheong Wa Dae economic team.
“The FTC is closely looking at the estimated consequences from Naver's business expansion in shopping, video and other platforms. The FTC doesn't have a plan to regulate companies, but just wants to promote free and fair competition between market players,” a government official said.
Kakao case
Similarly, Naver's top local rival Kakao launched a delivery service through its mobile messenger platform Kakao Talk in 2017. It does not require users to download a separate mobile application to order food or make payment.
In the beginning, only 50 franchise brands such as KFC, Burger King and Outback Steakhouse were available for order through the platform. As of September 2018, nearly 20,000 small restaurant owners have registered to take orders via Kakao Talk.
Kakao says the number has not increased much since then. Its market share in the food delivery service sector is not significant compared to that of the larger service platforms, such as the top player Baedal Minjok or runner-up Yogiyo.
“We are not looking into expanding our delivery service business. It is only one of the many tools we adopt to offer combined services on the Kakao Talk platform. We have many businesses to focus on apart from the delivery service,” a Kakao official said.