Woowa Brothers CEO Kim Bong-jin, who debuted Baedal Minjok in 2010/Photo Courtesy of Baedal Minjok

Desk column: Why Korea’s top food dlivery app suffers from a crisis

Baedal Minjok was once one of the country’s most respected startup companies, and its founding CEO Kim Bong-jin was touted as an innovative entrepreneur.

Every month, more than 10 million people use the food delivery app, which has become a business bellwether by garnering the lion’s share in the highly competitive Korean market.

Late last year, Germany-based global heavyweight Delivery Hero agreed to take over 87 percent of Baedal Minjok’s stake at $4 billion. In other words, its overall value neared $5 billion in less than 10 years after the 2010 foundation of Woowa Brothers.

However, Baedal Minjok has suddenly become a public enemy No. 1 after it introduced a new fee system of charging restaurant owners a fixed-rate commission of their sales’ 5.8 percent starting in April.

Up until then, most owners opted for a flat-sum system of which monthly fee was as low as $70. The users of the conventional system are now penalized in the search results.

The measure angered owners, who claim that Baedal Minjok tries to exploit small-sized restaurants at a time when they greatly struggle due to the virus outbreak.

Federations of restaurant owners lashed out at Baedal Minjok. A news outlet reported that an increasing number of owners are leaving the app.

And even politicians joined the anti-Baedal Minjok campaign headed by Gyeonggi Province Gov. Lee Jae-myung _ he vowed to make a public delivery app so that people do not have to depend on Baedal Minjok.

Such backlash prompted Baedal Minjok chief Kim to make a public apology this week, while promising to come up with measures to deal with expected problems. But the outfit does not plan to scrap its new pricing system itself.

Then, Gov. Lee asked consumers not to use food delivery apps at all, calling Baedal Minjok “monopolistic company.” Instead, he encouraged people to make a phone order to restaurants.

This would be a bad piece of news for Delivery Hero, which has yet to gain the approval of the Fair Trade Commission to complete its acquisition of Baedal Minjok.

The hitch is that Delivery Hero also operates the country’s second-largest food delivery app Yogiyo and No. 3 player Baedaltong.

In this climate, the mounting criticisms that Baedal Minjok takes advantage of its market power are feared to negatively affect the decision of the anti-trust watchdog.

Baedal Minjok has claimed that its new fee system is designed to reduce financial burdens of a majority of its users.

That might include some truths, although restaurant owners seem not to accept the explanation.

Plus, the timing could not be worse. The public wants to find a scapegoat to blame for the lingering troubles caused by the new coronavirus and the resultant economic troubles.

Hopefully, the issue will be settled in the not-so-distant future, and things will calm down regarding the virus, too.