Restaurant Owner with Only a Few Thousand Won in Hand and Riders Running Despite Heavy Snow... "Who Actually Makes Money?" (Comprehensive)

Restaurants face high delivery fees and various surcharges... Delivery margins are tight and profits minimal "Fault lies with delivery apps"
Riders endure dangerous work conditions and poor income structure... Ultimately, the issue is platform commission fees

On the 7th, when the temperature in Seoul dropped to minus 15 degrees Celsius and a cold wave warning was issued, a motorcycle delivery worker set out for deliveries during lunchtime on Seosomun-ro, Jung-gu, Seoul. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporters Lee Seon-ae and Lee Seung-jin] "The delivery apps have taken all the profits." On the evening of the 7th, the day after a heavy snowfall, Kang Won-hyung (pseudonym), who runs a snack bar in Guro-gu, zipped up his boots and held a delivery order in his hand, saying, "Since the order came from a nearby apartment, I will walk there myself." About 20 minutes later, he returned, tidying his clothes and said, "The delivery fees have increased too much, and on days like today, with subzero temperatures and icy roads, various surcharges apply," adding, "These days, I often deliver orders myself." He continued, "Even though delivery demand has exploded, the profits that return to self-employed business owners do not increase proportionally," emphasizing, "Because the costs involved in delivery business itself are high, the profit margin structure is much thinner than when running a traditional store. The fault lies with the platforms such as delivery apps and delivery agencies."

Is it possible for riders (delivery workers) and self-employed business owners to lead the changes in the industry ecosystem as partners in the 'Rider Economy' business, creating a win-win situation? Although the era of the 'Rider Economy' has officially begun, riders and self-employed business owners are both going through difficult times. Despite excessive costs, self-employed business owners have no alternative but to reluctantly use delivery apps and hire riders from delivery agencies. On the other hand, riders still cannot escape dangerous working conditions and poor income structures.

Nationwide Delivery Fee and Surcharge Increases... Profit Structures Worsen

From the beginning of the new year, delivery agency fees and various surcharges have increased nationwide. The increase varies slightly depending on the operating region of each delivery agency, but it is understood that the agency fees have risen by at least 200 won and up to about 1,000 won. Surcharges vary as well. Weather-related surcharges such as rain surcharges, areas with bridges and hills, apartments, and the presence or absence of elevators can add surcharges up to around 3,000 won.

When the average delivery agency fee is between 4,000 and 6,000 won, self-employed business owners typically split this cost 1:1 with consumers. The problem is that there are additional costs that self-employed business owners must bear. The biggest burden is the 'platform usage fee.' Although delivery apps charge different commissions, it is generally about 20% of sales (including payment processing fees). Labor costs and raw material costs are also expenses. As a result, the sales structure for restaurants has shifted from cost + incidental expenses to cost + increased incidental expenses (platform fees + delivery agency fees).

Delivery is enjoying unprecedented prosperity, but the reason why the self-employed business owners at the center of this industry are struggling is clear. Jang Young-jin (pseudonym), who runs a jokbal (pig's feet) restaurant in Yeongdeungpo-gu, said, "If I sell food worth 10,000 won, after all deductions, I think I only make about 3,000 won," lamenting, "No matter how much delivery demand increases and how many meals I sell, the profit margin for delivery business itself is so thin that the earnings are negligible." He added, "Although there was a delivery food boom due to the COVID-19 pandemic, the profits are actually concentrated with delivery apps and delivery agencies," and raised his voice, "Moreover, as competition to recruit riders among delivery agencies intensifies, recent increases in delivery agency fees and various surcharges are the negative consequences of delivery app competition." Yet, there is no alternative.

In the early days of delivery apps, joining a delivery app was a means to increase orders, but now, if you do not join a delivery app, you must brace for a hit to your business. Since delivery has become a necessity rather than a choice for self-employed business owners, they struggle to increase their 'delivery business margins' even slightly. In fact, various information sharing is active in self-employed communities. Wisely choosing the main platform to use helps reduce costs. They consider variables such as the number of orders and order amounts to determine which business partner is more advantageous.

Choi Chi-hyun (pseudonym), who runs a Korean restaurant in Seongbuk-gu, said, "Since rider delivery fees and delivery app commissions are fixed costs, the more expensive the menu items sold at once, the more attention is paid to set menus, and the minimum delivery order amount is raised to increase delivery margins." He added, "Considering the harsh environment of riders, it is not possible to ask for a reduction in delivery fees," and said, "I think wisely choosing the main platform to use will help reduce costs." Furthermore, Choi emphasized, "In the Rider Economy era, platform companies must establish a virtuous cycle system, such as lowering excessive commissions so that both riders and self-employed business owners can benefit evenly."

Delivering Even at Minus 20 Degrees... Need to Realistically Adjust Delivery Fees

The Rider Union identified establishing comprehensive standards and systems related to delivery as the top priority for coexistence among riders, self-employed business owners, and consumers. They also emphasized that the long-overdue realistic adjustment of delivery fees, stagnant for 10 years, must be achieved to resolve various delivery-related issues.

Gu Gyo-hyun, Planning Team Leader of the Rider Union, argued that the government should conduct a fact-finding survey related to the delivery industry and establish systems and standards based on it. He explained that problems are recurring due to excessive competition among riders caused by differing safety standards and wage levels among delivery agencies.

Gu said, "Even in heavy snow and severe cold like these days, riders go out for deliveries, but there are no clear standards regarding safety and delivery fees." He added, "During bad weather such as monsoons and heavy snow, some store owners pay extra delivery fees, but these are all individual decisions," and continued, "Riders who are short of money have no choice but to flock to companies that pay more or allow them to deliver many orders at once."

Without clear regulations related to delivery, riders who jump into delivery work are inevitably marginalized. There are frequent conflicts among riders, store owners, and customers due to the lack of clear regulations distinguishing responsibility when problems occur with delivery food. Also, in case of accidents, industrial accident insurance is not mandatory, so most riders have to cover costs themselves, according to the Rider Union.

Especially, the Rider Union pointed out the urgent need to resolve the stagnant delivery fee issue that has remained unchanged for 10 years. Gu emphasized, "Riders' delivery fees have remained the same for 10 years, while store owners using delivery agencies complain about commissions," adding, "Ultimately, delivery agencies should lower commissions to reduce store owners' burdens and increase riders' delivery payments to resolve excessive competition."

Meanwhile, as the delivery market grows rapidly, legal blind spots are also expanding. On this day, the National Assembly is expected to pass the Act on the Development of the Living Logistics Service Industry (Living Logistics Act), but concerns are spreading that this law could push ordinary people into legal blind spots. This is because the law includes provisions recognizing only cargo trucks and motorcycles as delivery and courier transport means.

Already, services like Baemin Connect by Baedal Minjok and Coupang Flex by Coupang allow ordinary people to freely deliver parcels or food using electric kickboards or on foot. Baemin Connect had surpassed 50,000 registered users as of last month, showing significant growth. If the Living Logistics Act passes, many delivery workers will be caught on the borderline between legal and illegal. The industry expressed regret and called for clear legal revisions that consider the reality.

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