[Open Forum] Public Delivery Apps Meant to Help Small Business Owners, But End Up Mismanaged, Wasteful, and Market-Distorting

Amid the delivery market’s rapid growth during COVID-19, various problems have emerged. As controversy persists over delivery platforms’ brokerage fees and alleged market monopolies, local governments have begun launching public delivery apps, claiming they will solve these issues.

Over the past two years, around 20 local government delivery apps have been launched, but compared with private delivery apps, they have shown markedly weaker performance in market share, annual sales, and annual transaction volume, and usage has remained low. In Yeosu, South Jeolla Province, “Singsing Yeosu” had only dozens of daily users on average and was ultimately forced to suspend operations. Even Gyeonggi Province’s “Baedal Teukgeup,” considered the strongest among public delivery apps, was found to account for only about 1% of the overall delivery app market, leading to continued criticism of local governments’ ambitious public delivery app projects.

The reason public delivery apps are struggling lies in local governments’ poor management of them. In the case of private delivery apps, hundreds of customer service staff stand by in real time to manage the platform, enabling prompt handling of issues. Public delivery apps, however, lack sufficient customer service personnel compared with private firms and are therefore unable to quickly address complaints from merchants or consumers. Measures such as outsourcing customer service have also been introduced, but even these have not functioned properly, and user inconvenience continues.

Another problem is the lack of factors that could secure competitiveness against private delivery apps in the market. Even the “low brokerage fees” promoted by public delivery apps are showing their limits. Lower brokerage fees do not create much difference in the food prices users pay when ordering, and the cost burden for store owners differs by only about 1,000 won. As a result, neither affiliated merchants nor consumers feel much incentive to switch from private delivery apps to public ones.

Even as questions are raised about the competitiveness of public delivery apps, many local governments are making excessive investments with taxpayer money under the banner of helping the self-employed. Gyeonggi Province poured 2 billion won in taxes into its delivery app in 2020 and 12.8 billion won in 2021, even though its market share was only about 1%. Local governments are investing enormous amounts of taxpayer money into delivery platforms, yet there has been little meaningful change in delivery app market share, and in many cases the business is shut down despite those investments. As public delivery apps fail to gain competitiveness, only unnecessary waste of taxpayer money continues.

It is necessary to reconsider whether it is truly desirable to keep launching and maintaining public delivery apps that have no real effectiveness. It is not right to spend large amounts of tax revenue creating and maintaining platforms solely in the name of coexistence between the self-employed and users. Rather than having the government directly participate in the delivery market, should the priority not be to create an environment in which private companies can compete freely within the market?

It must not be forgotten that launching public delivery apps through excessive tax investment does not promote healthy competition in the market; instead, it can distort the market and undermine fair competition.

Kyungeun Kim, Intern Researcher, Center for Free Enterprise (CFE)

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Original title: [자유발언대] 공공배달앱, 자영업자 위한다더니 ... 관리부실ㆍ세금낭비ㆍ시장교란

Author: Kyung-eun Kim

Date: 2022-07-08

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=8&idx=24838