[Inside Chodong] Where Did All Those Expensive Delivery Fees Go?

Complex Structure of Delivery Fees:
Store Owners, Consumers, and Riders All Highly Sensitive
Time for an Agreement Acceptable to All Stakeholders in the Ecosystem

On May 5th, Children's Day, delivery workers affiliated with the Delivery Platform Labor Union of the Korean Confederation of Trade Unions Service Federation, working for Baedal Minjok, went on strike for a day. The union's demand was to increase delivery fees, which have been frozen for nine years. At first glance, this claim seems disconnected from reality, as consumers feel the burden of delivery fees is already high. This has also led to a continuous decline in delivery app users. However, upon closer examination, the situation is somewhat different. The union is not asking to raise the delivery fees charged to customers and store owners, but rather to increase the portion of the existing delivery fee that goes to the delivery workers (riders). Meanwhile, the company explains that most of the delivery fee already goes to the riders. This case clearly illustrates the complex structure of delivery fees and the sensitive interests involved. Consumers feel delivery fees are expensive, yet the riders' share is insufficient, and the company claims it does not profit from these fees. So, where does all that expensive delivery fee go?

The structure of delivery fees varies by platform, and even within a single platform, it differs depending on whether the delivery is a single order or a bundled delivery. Taking Baedal Minjok (Baemin), the market leader, as an example, the basic delivery fee for its single-order delivery service called 'Hanjip Delivery' is 6,000 KRW. This fee is split between the store owner and the consumer. The store owner decides how to divide this cost. Consumers pay the portion excluding the store owner's share plus any distance surcharges. Store owners determine their share based on various factors such as the store's commercial area, menu, and business strategy. For example, if the average spending per customer is low and the menu has a small margin, the store owner may find it difficult to pay a large share of the delivery fee, naturally increasing the consumer's burden. In highly competitive areas, the consumer's share may be lowered. Since Baemin introduced a new pricing plan in March last year, it has neither changed the delivery fee system nor raised prices. Therefore, if delivery fees have recently increased, it may be due to stores adjusting their share of the delivery fee amid worsening market conditions such as decreased delivery demand and inflation.

Moreover, the delivery fee burden perceived by consumers does not only come from deliveries directly performed by the delivery platform. That is only a part; in many cases, deliveries are carried out through delivery agencies. In Baemin's case, about 85% of delivery orders are handled this way. In this service, the platform only mediates orders and does not intervene in the delivery process. Store owners contract with delivery agencies to deliver food, and if these agencies raise delivery fees or add surcharges, this burden may also be passed on to consumers.

So, from the riders' perspective, what is the real story behind the conflicting views on the share of delivery fees? For Baemin's Hanjip Delivery, riders receive 3,000 KRW out of the basic 6,000 KRW delivery fee. The union demands this be increased to 4,000 KRW. However, the company insists that most of the delivery fee already goes to the riders. Some of the fee is used to operate and improve the delivery system, and the rest varies depending on weather and market conditions. A delivery app official stated, "If the burden of increased delivery fees due to market conditions is passed on to store owners and consumers, user attrition may continue, so the platform plays a buffering role and bears the remainder."

Neither side is entirely right or wrong. The delivery fee controversy is mostly entangled in such complexity, making it difficult to clearly judge. It is even harder to understand the whole picture from just a few cases. However, one clear fact remains: if the delivery fee burden continues to increase, it could lead to user attrition and ecosystem collapse. It is time for the ecosystem's key stakeholders?consumers, store owners, and riders?to reach an agreement that everyone can accept.

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