The food delivery business is taking off in the US. In December 2020, online food sales showed a 138% year-on-year growth. That’s more than double the previous year’s numbers. But intense competition is making delivery giants look elsewhere. The result is a search for new markets to expand and test their services. Far East Asian markets are high on the list for scaling operations. China already has established players like Meituan and Ele.me. This saturation has made countries like Japan and South Korea attractive destinations.
Dashing Japan
Earlier this month, DoorDash stocks rose on the back of a report by Nikkei Asia. The article said that the company is looking for a manager to run its operations in Japan. Only 5% of Japanese restaurants provide food delivery. And platforms see massive potential in the market. Due to the rise in COVID-19 cases, Japan has imposed a state of emergency in several prefectures. This status has curtailed local movement and restaurant timings. Delivery companies are hoping this will tilt the balance in their favor.
Japan is not likely to be a cakewalk, though. Uber Eats and Demae-can have a sizable market presence. Last year, two more challengers made their mark. April saw the launch of Didi Food by Chinese ride-hailing behemoth Didi Chuxing. German multinational Delivery Hero SE started operations in September. With several big players entering the fray, competition is heating up.
DoorDash might also have to contend with another challenge. Skeptical restaurant owners that have not warmed to food delivery.
Courting Korea
Speculation has been rife around the acquisition of Yogiyo, South Korea’s No. 2 food delivery service. Delivery Hero has put the brand up for sale to complete its takeover of Woowa Brothers. Woowa operates the country’s largest service Baedal Minjok. The top contenders? DoorDash, Uber Eats, and Coupang, a Korean e-commerce business. Coupang’s very own Coupang Eats ranks No. 3 in the market. While an acquisition will make it No. 2, there are concerns over its financial situation.
With an estimated value of 2 trillion won, there are few local takers for the company. Korean tech giant, Naver, owns Japanese food delivery company Demae-can. Internet company Kakao is another contender. But both have courted controversy in the past. And commissions and contractual employment bring bad press. For South Korea’s largest retailer E-mart, Yogiyo might be a good fit. But it may not be able to fork out the required cash.
Food Delivery War
Enter DoorDash and Uber Eats. As an OECD member, Korea ranks high in purchasing power and IT infrastructure. Euromonitor estimated a 40% surge in food delivery orders to $15.4 billion in 2020. This surge makes it the third-largest market behind China and the US and an ideal testing ground for new services.
Will Couriers Benefit?
Like most countries, the pandemic has affected job markets in Japan and South Korea. Korea, in particular, has seen its highest unemployment rate in 10 years. The initial surge in pandemic-fueled orders had delivery companies scrambling to recruit riders. Attractive financial benefits lured jobless youth to the booming industry. But competition has made it difficult for drivers to secure deliveries. To reduce delivery times, couriers violate traffic rules endangering their and others’ safety.
For food delivery platforms, grabbing market share is the first order of business. This priority means discounts for customers and bonuses for couriers.
Early joiners might gain from the flurry of incentives offered in this phase. But as supply outstrips demand, things will change. Platforms will be able to extract more from riders while giving a lot less in return. Unless the market improves, there is little that couriers will be able to do about the situation.
Summary
Asian markets in the Far East have their challenges. While some countries have untapped potential, others have worthy challengers. Even companies with deep pockets might not find it a walkover. The entry of DoorDash or Uber into new markets might mean more jobs. But more does not mean better. Riders should make the most out of the first wave of incentives before moving on to better things.
