Korea's public delivery apps struggle to turn low fees into lasting loyalty

President Lee Jae Myung on Tuesday called for measures that would help public delivery apps become a meaningful counterweight to dominant private platforms whose high fees are considered a burden on small businesses.

But despite initially winning users over with cheaper rates, many public apps have struggled to maintain their user base and transaction volume once state subsidies scale back, raising questions about whether they can become self-sustaining.

At a Cabinet meeting at Cheong Wa Dae in Seoul, Lee described the food delivery market as “effectively a powerful oligopoly,” after being told that food delivery apps Baemin and Coupang Eats together account for roughly 93 percent of the market.

Lee Byeong-gweon, second vice minister of SMEs and startups, stated that the government plans to use next year’s budget to give public delivery apps a major boost. “We are planning a support program aimed at raising their combined market share to 15 to 20 percent.”

There are currently 12 public delivery apps operated or supported by local governments across the country. Since 2020, local authorities have launched their own platforms or partnered with private players, as small businesses grew frustrated with commissions charged by major market players that can reach up to 7.8 percent of transaction value.

The public alternatives have largely competed on price. Gyeonggi Province’s Special Delivery and Daegu’s Daeguro charge commissions ranging from zero to 2 percent, while public-private services such as Ttaenggyeoyo and Mukkebi typically charge around 1.5 to 2 percent.

In 2025, the Ministry of Agriculture, Food and Rural Affairs sought to boost their usage through a 65 billion won ($47 million) support program.

But lower fees have done little to build lasting customer loyalty. Baedal Myeongsu, operated by Gunsan City, North Jeolla Province, for instance, saw its annual transaction value fall from 9.06 billion won in 2021 to 5.2 billion won last year. Busan’s Dongbaek Tong, which cost the city 4.4 billion won to develop, shut down in 2024 after just two years of operation.

Industry officials say the services have struggled to turn the initial wave of users drawn by subsidies and discounts into regular customers, in part because they lack the features and service quality needed to keep them coming back. Public apps face a structural disadvantage: their mandate to keep fees low and support local businesses leaves less room to invest at the same scale as commercial rivals.

For the public platforms to become viable alternatives, analysts say low fees and policy incentives like cash and consumer vouchers will not be enough. These platforms will also need sustained investment to improve basic services, expand their restaurant networks, build reliable delivery infrastructure and improve user experience.

Lee also stressed the need to address the fragmented structure of the public delivery app market rather than simply pouring more money into it.

“There are some that are doing quite well, but isn’t the overall system itself highly inefficient?” he said at the Cabinet meeting. “Financial support is certainly necessary, but what is more important is integrating their management.”