[Desk Column] Delivery Economy and Growing Pains

[Asia Economy Reporter Myung Jin-gyu] A bakery near my home has closed down. It was a small bakery named after its owner that was once popular. Although it wasn’t as sophisticated as branded bakeries, it made fairly good bread. However, as business declined, the bread prices were lowered, which also led to a drop in quality, causing even the remaining customers to leave. Even though the landlord joined as a kind lessor and reduced the rent, the lowered rent was still unaffordable, and the bakery had to close.

After some interior renovations, a tteokbokki (spicy rice cake) restaurant opened. I thought it was just a neighborhood snack bar, but they don’t sell single servings. The price for two servings is 15,000 won, which is quite steep. Looking at the menu, there were many dishes more suited as drinking snacks, such as dakbokkeumtang (spicy braised chicken) and gopchang bokkeum (stir-fried beef intestines), which are unusual for a snack bar. Inside the restaurant, there were only three tables. One of them was used to place packaged food for delivery. This makes sense because in neighborhood snack bars where one serving of tteokbokki costs about 3,000 won, using delivery services can cost more than the food itself.

According to Statistics Korea, the transaction amount for food delivery services in 2019 was 9.7365 trillion won, an 84.6% increase from 5.2731 trillion won in 2018. Considering that it was 2.7325 trillion won in 2017, this represents nearly double growth for two consecutive years. It is also forecasted to reach 20 trillion won in 2020. As a result, government policies inevitably focus on delivery apps. The dining-out coupons provided by the Ministry of Agriculture, Food and Rural Affairs have effectively become discount coupons for delivery apps. If you order four times, you can get a 10,000 won refund.

Rapid growth inevitably comes with growing pains. The side effects are significant. Although the dining-out coupons were intended to support social distancing and help small business owners, those who do not use delivery apps are excluded from these benefits.

Every night, motorcycles rushing to deliver food perform reckless driving throughout the streets. It is common to see motorcycles with two or three delivery boxes attached to the back and backpacks on their backs. Some even have two or three plastic bags hanging from the handlebars. These motorcycles sometimes cross the center line and, when roads are congested, even ride on sidewalks. According to the Ministry of Land, Infrastructure and Transport, motorcycle accident fatalities increased by 13.7% from January to June last year.

The amount of waste generated by delivery services has become difficult to manage through normal methods. Although both plastic and paper containers are recyclable, if food residue remains, they cannot be recycled. As commonly known, even washing them with water does not make them recyclable and they must be discarded. Cup noodle containers are a typical example. Even plastic bags with food residue cannot be recycled. This is why the increase in delivery services leads to more waste that must be discarded.

The government announced policies to curb reckless motorcycle driving by creating and distributing the “Guidelines for Protecting Two-Wheeled Food Delivery Workers” and plans to phase out single-use plastics in all industries by 2030, but doubts remain. The key point of the guidelines is that if delivery workers violate traffic laws, the business owners will also be punished. The environmental recycling policy is basically about expanding the mandatory use of recycled materials in product manufacturing, which essentially asks business owners to take care of it themselves.

As a result, delivery fees have increased since the beginning of the new year. Although the increase is only about 500 to 1,000 won, delivery fees themselves have risen by 30%, and when combined with food priced under 10,000 won, the total amount to be paid has increased by nearly 10%. There are various reasons for the price hike. The first is the rise in labor costs, and increases in platform operation and maintenance costs are also factors. According to a survey conducted last August by Seoul, Incheon, and Gyeonggi Province, 80% of restaurants affiliated with delivery apps responded that they raise food prices whenever commissions or delivery fees increase. Therefore, food prices inevitably rise as well.

Because of this, more restaurants are choosing to deliver food themselves instead of using delivery apps. There may be reasons for this, but it brings a bittersweet feeling, reminding me of the past “Chinese restaurant iron delivery box” era when they delivered a bowl of jajangmyeon (black bean noodles) without charging a delivery fee.

This content was produced with the assistance of AI translation services.