Woowa Brothers to hike commission to 9.8%
Pieter-Jan Vandepitte, interim representative of Woowa Brothers, speaks during a press conference at the company's office in central Seoul, Wednesday. Courtesy of Woowa Brothers
Woowa Brothers, the operator of the delivery app Baedal Minjok, colloquially know as Baemin, announced, Wednesday, that it will increase its commission rate that is charged to restaurants to 9.8 percent. Currently, the platform charges registered restaurants a commission of 6.8 percent per order.
The fee hike, slated to begin next month, is expected to place additional burden on restaurants, many of which have frequently complained that the rate is already excessive. Furthermore, there are fears that the decision is likely to be passed on to consumers through increased food item prices.
The commission increase was among the company's business plans that were unveiled by its interim representative Pieter-Jan Vandepitte at its headquarters in Seoul as a way to secure more profitability.
He said that the company’s new fee rate has been adjusted to the average level in the food delivery industry. Its rivals Coupang Eats and Yogiyo, charge 9.8 percent and 12.5 percent commissions, respectively.
Its official said the measure was inevitable to “survive the fierce, endless competition” among major local delivery companies that are now offering "free" delivery services to their food-ordering customers with paid memberships.
“We’ve been offering the lowest delivery rate in the country’s food delivery industry. Because of that, we’ve come to realize that it’ll be difficult to keep competing with our rivals by offering free delivery services to our customers with our old delivery surcharge rate for food businesses,” the official said.
However, the latest measure by Woowa Brothers has drawn criticism from businesses and the government.
Some business operators have complained that the company has disregarded their financial difficulties regarding the brokerage fee. These complaints arise as the country has experienced soaring market prices for produce, manufactured food products and other food ingredients throughout the year, driven by volatile oil prices and exchange rates. As a result, food businesses have been forced to raise their prices, leading to a decline in customers and falling sales.
A delivery rider of Baemin, an online platform for food ordering and delivery operated by Woowa Brothers, is seen on the job in February 2022. Yonhap
“Last year, we requested the company to reduce the rate, but they disregarded our request,” said an owner of a restaurant franchisee. “Now, instead of lowering it, they have raised the rate, putting significant pressure on us."
He highlighted that despite the company achieving an operating profit of nearly 700 billion won ($505 million) last year, marking a 65 percent increase from 2022, the fee hike still occurred. The company's sales during the same period also rose by 15.9 percent to over 3.4 trillion won.
The Fair Trade Commission (FTC), the country’s anti-trust watchdog, described Woowa Brothers’ decision as "disappointing," particularly at a time when restaurants and other small-to-medium-sized (SME) food businesses are closing down due to declining sales.
“The importance of mutual business partnerships among entities in the country’s food industries has never been more important. The initiative is supported by not just the FTC but the ministries of finance, food and SMEs, all of which are involved in national economic policies,” said Park Seol-min, who leads the digital economy policy division under the FTC’s competition policy bureau.
“Woowa's rate hike has dealt a blow to that initiative.”
Park added that the FTC plans to convene a meeting with delivery service providers and food business representatives within this month to explore solutions and introduce policies that can satisfy all stakeholders.