Once known as the "national delivery app," Baemin is encountering growing backlash from local business owners who claim it "m...
Once known as the "national delivery app," Baemin is encountering growing backlash from local business owners who claim it "maintains high commission rates by using its strong market influence." The government and political groups are also increasing their pressure. However, Baemin shows no signs of changing its approach. Experts believe this inflexibility is due to two reasons: the obligation to transfer earnings to its German parent company, Delivery Hero (DH), to address its financial issues, and the need to resist the advances of competitor Coupang Eats.
The Korea Fair Trade Commission has recently issued inspection reports to Baemin twice in two months—similar to a prosecutor's indictment. The reports claim that Baemin pressured affiliated businesses to utilize its high-commission service, "Baemin Delivery," and required them to align food prices with those of Coupang Eats.
In the realm of politics, the Euljiro Committee of the Democratic Party of Korea is examining a special law aimed at implementing a "commission cap." During last month's inspection, Baemin became a major target of criticism. Representative Park Hyung-soo from the People Power Party stated, "Baemin is draining the lifeblood of small business owners," while Representative Heo Jong-sik from the Democratic Party of Korea remarked, "It ignores repeated warnings." Self-employed workers argue, "Selling a 10,000 Korean won meal results in a 4,000 Korean won commission deduction," and are considering collective legal action.
◇ Baemin as a Cash Machine for the Parent Company
Nevertheless, Baemin has no indication of reducing fees. Two challenges lie at the heart of its persistence.
The underlying issue is DH's crisis. In August, DH's main shareholder, the media company Nasper, revealed intentions to sell shares for other investments. As Nasper continues with gradual stock sales, a sharp decline in DH's stock price is unavoidable. Analysts believe DH will generate maximum profits through its cash cow, Baemin, to support its stock. Baemin has transferred roughly 1 trillion South Korean won to DH over two years—412.7 billion won in 2023 and 532.7 billion won last year—through dividends and stock repurchases. Industry experts comment, "Baemin functions as an ATM, transferring significant profits from the South Korean market to its German headquarters."
Baemin is also trying to substitute its current rider dispatch system, "Baemin Connect," with a new one created by DH. Although presented as "system modernization," industry experts see this as a strategy to boost royalty payments to the parent company.
◇ Coupang Eats' Intense Pursuit
Coupang Eats' rapid expansion is also putting pressure on Baemin. In August, Coupang Eats' card transaction volume in Seoul (211.3 billion South Korean won) exceeded Baemin's (160.5 billion South Korean won). While Baemin still holds the lead nationwide, the difference has significantly decreased from 280 billion South Korean won a year ago to 80 billion South Korean won recently.
The problem stems from Baemin's approach: choosing the simplest path—reducing commissions—to protect its market position and profits rather than pursuing innovation. Experts caution that this might result in "missing the bigger picture for minor details." Professor Lee Sung-hee from the Department of Business Administration at Hoseo University stated, "Baemin's emphasis on immediate profits without investing in the future is causing it to fall behind competitors. Prioritizing profit over the interests of app users and affiliated businesses could lead to market backlash."
Baemin claims it has made a significant contribution to society alongside its financial gains. A spokesperson from Woowa Brothers, the company behind Baemin, said, "Baemin introduced the commission reduction initiative, which came from last year's joint growth committee, earlier than any other company starting in February this year. Through the Euljiro Committee-led social discussions, we also announced support programs for business owners, such as waiving brokerage fees for small orders. Moreover, over the past three years, we have paid 520 billion South Korean won in corporate taxes and carried out 200 billion South Korean won in social investments aimed at restaurant owners, delivery personnel, and others."
