Food delivery specialist Woowa Brothers sees woes deepen

Woowa Brothers founder Kim Bong-jin / Korea Times file

By Kim Jae-heun

The country's No.1 food delivery service, Woowa Brothers, is experiencing choppy waters as it faces toughened labor laws, while major lender Shinhan Bank entered the highly competitive industry recently.

Parent company Delivery Hero, which acquired Woowa Brothers earlier this year, pulled its Berlin-headquartered food delivery service Foodpanda out of six German cities: Frankfurt, Munich, Stuttgart, Hamburg, Cologne and Dusseldorf.

This was mainly due to the emergence of strong competitors that ate away at Foodpanda's market share, while Germany adopted tougher labor laws that raised food delivery fees. There is no guarantee that Woowa Brothers' food delivery service, Baedal Minjok, will be able to escape the same fate.

Shinhan Bank began food delivery services on a trial basis on Dec. 22 exclusively in the districts of Gangnam, Seocho, Songpa, Mapo, Gwanak and Gwangjin, all in Seoul. It offers the lowest commission fee of 2 percent, compared to the 11.4 percent average commission fee charged by other local food delivery players. Shinhan Bank also has its own electronic payment agency system that requires no additional interest or fees, translating into cheaper delivery fees.

Banks are not allowed to operate a business that is irrelevant to financial services under the current law. However, the Financial Services Commission gave Shinhan permission last year under a regulatory sandbox program that allows fintech firms and other innovative companies to experiment with new businesses. Shinhan Bank has permission to offer the food delivery service for four years. A Shinhan Bank official said the period can be extended if related regulations are revised.

Woowa Brothers has already been challenged by Coupang Eats, a food delivery service launched in 2019 by the country's largest online retailer, Coupang.

Coupang Eats introduced a “one-order-per-delivery” service for the first time here that catapulted it instantly to third place after Baedal Minjok and Yogiyo. Its market share is still far behind the top two players'. However, Coupang Eats grabbed a 45 percent share of the three most affluent districts in southern Seoul to rival Baedal Minjok.

The monthly active users (MAU) of Coupang Eats also surged by 15 times from 29,869 last year to 460,235 this year. This helped its overall market share to increase from 7.1 percent to 18.7 percent.

Woowa Brothers plans to expand its food delivery service with Delivery Hero in the burgeoning Asian market. However, the German firm also failed to expand its food delivery service in Japan and is likely to sell it off in the first quarter of next year, according to recent reports.