Your browser does not support JavaScript!

Rising Delivery Costs Trigger Dual Pricing in Korea's Food Industry

Journalist Note October 29, 2024
goover

TABLE OF CONTENTS

  1. Introduction
  2. Major fast-food franchises in Korea implement dual pricing, citing delivery fees and operational pressures, sparking consumer discontent and calls for transparency.

1. Introduction

  • Recent reports from Korea indicate a significant shift in pricing strategies among major fast-food franchises, primarily due to rising delivery costs. These companies have increasingly adopted a 'dual pricing' system, where delivery orders are priced higher than in-store purchases, leading to concerns about transparency and consumer rights.

2. Major fast-food franchises in Korea implement dual pricing, citing delivery fees and operational pressures, sparking consumer discontent and calls for transparency.

  • Major fast-food chains in Korea, including McDonald's, Burger King, Lotteria, and KFC, have adopted a 'dual pricing' strategy, where delivery prices are higher than those for in-store purchases. This move is attributed to increased delivery platform fees, which can take up to 30% of a franchise's revenue, leading to a need for offsetting costs by raising delivery prices.

  • The lack of transparency in informing consumers about these price differences has sparked criticism. According to recent observations, most of these franchises do not clearly disclose the pricing differences between delivery and in-store purchases on delivery apps. This has led to growing concerns over consumer rights and informed choices.

  • As an example, ordering a Big Mac set from McDonald's or a Bulgogi Burger set from Lotteria for a family of four via delivery incurs an extra 5,200 KRW. Meanwhile, brands such as Mega MGC Coffee and Compose Coffee also practice dual pricing by charging around 500 KRW more for delivery orders without informing their customers prominently on apps.

  • Consumer advocacy groups have urged delivery apps to make dual pricing more transparent. In response, some companies have pledged to enhance the clarity of their pricing notices. However, similar guidelines issued in 2021 have yet to result in substantial changes, despite repeated recommendations.

  • Meetings between delivery platforms and franchised outlets aim to address the burden of these costs and find solutions that lighten the financial load on consumers, amid mounting public frustration over these burgeoning costs and lack of clear price communication.

Glossary

  • Dual Pricing System [Pricing strategy]: The dual pricing system refers to the practice of setting different prices for the same product, depending on the sales channel. In the context of the Korean fast-food industry, this means setting higher prices for delivery orders than for in-store purchases. The strategy is employed to offset the high fees charged by delivery platforms, which significantly impact the profit margins of franchisees.
  • Major Fast-Food Chains [Companies]: Chains such as McDonald's, Burger King, Lotteria, and KFC have all implemented dual pricing strategies, where delivery prices are higher than those for dine-in customers. This practice has raised concerns among consumers and has been a significant focus of criticism regarding transparency in consumer pricing.
  • Korea Consumer Agency [Government agency]: The Korea Consumer Agency acts to protect consumer rights in the country. In recent times, it has been proactive in requesting delivery apps to distinctly mark any dual pricing to ensure consumers are well informed regarding the cost discrepancies between delivery and in-store prices.

Source Documents