Negative public opinion related to excessively high service fees, as well as competition, should lead to decreases in these fees. (image: Kobiz Media / Korea Bizwire)
SEOUL, Jan. 15 (Korea Bizwire) — Amid controversy over the encroachment of sole proprietor small businesses by the rise of O2O (online to offline) business, it is expected that service fees of delivery apps, representing O2O business, will decrease over time.
According to a report released by the KB Financial Group Research Institute, sales of the three major delivery apps Baedal Minjok, Yogiyo and Baedaltong were estimated to be 100 billion won in 2014. The delivery apps are mobile based O2O business linking consumers to service providers. Thanks to the spread of smartphones and aggressive marketing activities, their sales skyrocketed recently with the rise of active service users.
Chung Hun, the author of the report, said, “The service fee burden for delivery food restaurants ranged from 10 to 17 percent, but it lowered a little recently. Negative public opinion related to excessively high service fees, as well as competition, should lead to decreases in these fees.”
He also discussed noteworthy impacts on O2O businesses, such as delivery apps. In his analysis, the business spheres in which O2O businesses are encroaching are food and taxi (in case of Uber and Kakao Taxi), mainly managed by self-employed individuals. “Start-ups are taking the existing market rather than creating new value-added businesses based on IT development and the ubiquity of smartphones,” he said.
Meanwhile, as the controversy over high service fees continues, the Fair Trade Commission decided to investigate the amount of the respective service fees of the apps, and disclose it to the public. Also, the Special Committee for Small Businesses of the ruling Saenuri Party began investigating the service fees.
Last year, some 840,000 self-owned small businesses closed. Among the vulnerable small businesses, the food delivery business is the weakest.
A delivery food restaurant owner said, “Do you know why I deliver food? Because there are not enough tables to serve food in my restaurant. For delivery food restaurants like mine, the service fee of several hundred won to 2,000 won is not small money.”
By John Choi (johnchoi@koreabizwire.com)
