'Back to Baemin' once coupons dry up: W120b sunk into public delivery apps

"It is hard to get consumers who do not use win-win delivery apps to download and use them simply by offering delivery fee coupons."

Lee So-young, the nominee for minister of SMEs and Startups, made that assessment of the government's support method for win-win delivery apps during a press briefing on Tuesday, after visiting the Korea Federation of Micro Enterprise in Yeouido, Seoul. "I have seen, through my work on the Budget and Settlement Committee, that the same fiscal spending can sometimes be used more effectively," Lee said. "I will work to make the win-win delivery app plan more concrete during the National Assembly's review process."

The government's proposed budget for next year's "support for win-win delivery apps," which Lee referred to, stands at 124 billion won ($92.5 million). Of that, 120 billion won is earmarked for consumer discount coupons, with the remaining 4 billion won for promotion. The government plans to select three or four public delivery apps operating nationwide for intensive support, based on evaluations of their public value and market competitiveness. Under this structure, 96.8 percent of the total budget goes toward consumer incentives.

The boost that "consumption coupons" give to public delivery app usage has already been demonstrated. Last year, the Ministry of Agriculture, Food and Rural Affairs used a supplementary budget of 65 billion won to run the "Public Delivery App Revitalization Consumption Coupon Project." Twelve apps took part: Baedal Teukgeup, Daegu-ro, Baedal Moa, Jeonju Matbaedal, Baedal-ui Myeongsu, Baedal e-eum, Ulsan Pedal, Baedal Yangsan, Ddaenggyeoyo, Meokkaebi, Wemepro and Hwipalam.

The effect was substantial. The market share of public delivery apps rose from 4.6 percent in December 2024 to 10.8 percent in October last year. The ministry's own assessment found the coupon project saved 35.1 billion won in intermediary fees and generated an additional 432.9 billion won in dining-out sales. Order volume from June 10 to Sept. 24 last year also jumped 219.5 percent, from about 4.21 million in the same period the previous year to about 13.451 million.

The problem emerges once the coupons run out. According to Mobile Index, the monthly active users of the public delivery app Ddaenggyeoyo fell 36.6 percent, from about 3.55 million in December last year to about 2.25 million in August this year. Meokkaebi likewise dropped 28.9 percent, from 690,000 users in November last year to 490,000 in August this year. The pattern repeats: usage briefly surges when government or local budgets are injected, then rapidly declines afterward.

There are three conditions for improving the sustainability of public delivery apps. The first is securing "active store density" rather than simply the number of registered stores. Busan's Dongbaektong, built with 4.4 billion won, recorded 8,000 affiliated stores, 230,000 downloads and cumulative sales of 4.2 billion won within a year of its 2022 launch. But the service was shut down in May 2024. The biggest problem was that, of the 11,000 stores registered just before the service ended, only 1,800 actually had transactions.

Daejeon's Hwipalam fared similarly. Despite about 1.4 billion won invested over two years, it had only 4,328 affiliated stores and 209,000 orders. That amounts to an average of 48 orders per store over two years — about two per month. Amid growing complaints about usability, the Daejeon Metropolitan Government did not renew the operating agreement.

By contrast, Baemin focused early on securing restaurant data. Founder Kim Bong-jin has said in interviews that he gathered information on more than 50,000 restaurants within six months using flyers and printing companies, and that the restaurant database had grown to 100,000 entries by 2012. As restaurant options increased, consumers gathered; as consumers increased, more restaurants joined — a network effect.

Delivery quality is also key. Coupang Eats, which entered the market as a late mover in 2019, promoted a "one rider, one delivery" model. Starting in parts of Seoul, it assigned a single delivery worker per order and aimed for delivery within about 30 minutes. At the time, it scrapped delivery fees and minimum order amounts for consumers while separately recruiting delivery partners — expanding both consumer benefits and delivery infrastructure at once.

Second, public delivery apps need incentives beyond discounts to bring users back. Gunsan's Baedal-ui Myeongsu, which has operated for six years, links its payment system to the local currency, the Gunsan Sarang gift certificate. Sales through May this year reached 2.38 billion won, with much of that reportedly paid through the local currency.

"Seoul Baedal+Ddaenggyeoyo," run by the Seoul Metropolitan Government and Shinhan Bank, posted annual sales of 154.4 billion won last year, 3.6 times the 42.3 billion won recorded the previous year. Orders totaled about 6.17 million, affiliated stores numbered 54,000 and members reached about 2.5 million. The app links Seoul Love and Onnuri gift certificates as payment options and applies a 2 percent intermediary fee.

Third, operators need a structure that allows the business to survive once government support ends. Even with intermediary fees lowered to 0-2 percent, costs for server development, payments, customer service, delivery networks and marketing continue to accrue, and operating costs rise as transactions grow. In the direct-operation model used by many local governments, which lack a separate revenue source, budget cuts translate directly into service cuts.

Jeonju Matbaedal illustrates the problem. The app's annual sales fell from 4.8 billion won in 2023 to 3.3 billion won in 2024 and 1.9 billion won last year. Its related budget likewise dropped, from 700 million won in 2023 to 320 million won this year, while its number of affiliated stores has stagnated — 1,526 last year and 1,608 as of June this year.

"Local governments across the country have directly run or supported public delivery apps and pursued numerous projects, but successful cases are hard to find," said Lee Jung-hee, a professor of economics at Chung-Ang University. "This is because public delivery apps have focused on lowering intermediary fees below 2 percent with government support. Ultimately, success or failure comes down to consumer usage rates. How many users participate determines the sustainability of public delivery apps," she said.

Kim Sung-hwan, a professor of economics at Ajou University, argued that public delivery apps need structural measures to lower barriers to market entry if they are to compete on equal footing with Korea's leading delivery apps. "This means cutting fees and consumer prices, and sharing store databases and other information and infrastructure built through public delivery app operations with new platforms for a set period," Kim said.