An Insight into Vietnam’s Food Delivery Market and its Role in the Country’s Road to Recovery

BRIEF INTRODUCTION

Jason Chu is the Head of Merchant Business Development at BAEMIN, an online food delivery application operated by Woowa Brothers Vietnam, an affiliate of Woowa Brothers – the leading food delivery company in Korea established in 2010. Woowa Brothers Vietnam introduced BAEMIN service in Vietnam in May 2019 and has established itself as a leading food technology company.

In 2021, Woowa Brothers became part of Delivery Hero – a global leading food delivery company operating in more than 50 countries across the globe, and 16 countries in Asia. BAEMIN is currently offering 4 services: food delivery, BAEMIN Mart (grocery delivery), BAEMIN Kitchen with exclusive Korean signature dishes, and BAEMIN Studio where users can find familiar yet creative and highly customised merchandise. In the same year, BAEMIN is also the most popular app in the Food & Beverage category on Google Playstore and App Store and is available in 10 major cities with more-to-come at the end of the year.

UNDERSTANDING THE FOOD DELIVERY MODEL

How do food delivery aggregators work?

Let’s step back to have the overview of food delivery business. There are 2 main types of food delivery models in every market:

1. Business to customer (B2C): the restaurants own the whole journey, from ordering to delivery to customers. Eg: Domino’s pizza, KFC…

2. Platform to customer (P2C): restaurants work with food aggregators to be responsible for partial or total customer journey, depends on the sub-model:

   1. ordering/ listing only: the platform only lists restaurants many and (optional) provide payment solution, restaurants do the delivery

   2. logistics-focused/ delivery: the platform handles the full process from customer to deliver the food at door

BAEMIN and other major food aggregators in Vietnam have the latter model.

Where does most of the commission go?

Currently all the commission goes to reinvestment on merchants to provide attractive deals to customers (and we also put some more money on it). So basically all food delivery players are now making loss in order to prioritize and maximise market size growth. In the future, we expect to reach break-even point with better investment optimization and operation fine-tuning.

How does the delivery algorithm work? 

The ordering process is straightforward: an user opens our app and places an order on the menu of a certain merchants, the order is immediately transferred to merchant app. If that merchant accepts the order, a rider will receive info and get to pick up the food then deliver to that user. The whole process can be tracked in BAEMIN user app.

The algorithm to select a rider is based on multiple criteria but two main ones are distance and rider rating. We are working to improve the algorithm to deliver better user experience and balance the supply-demand.

OUTLOOK OF FOOD DELIVERY IN VIETNAM

Can you give an overview of the food delivery market in the past year or two?

SEA Food delivery GMV nearly tripled in 2020 (grew 183%), one of the main factors was the Covid-19 pandemic. VN is one of the fastest growing markets in the region.

Currently users are making most of the orders for lunch and afternoon snacks, due to the limit of free time in office hours. The average order value varies by the price range of restaurants and different markets, but the majority is group order to minimize the delivery fee per person.

The main driver for food delivery now is still promotion. But we are seeing the shift of users paying more attention to the convenience of delivery and restaurant assortment, adopting food delivery for more occasions (dinner, breakfast...). Other macro-trends are also reflected on food delivery like the environmental awareness (no plastic cutlery), or healthier food choice.

Another significant trend is ‘Quick Commerce’ (coined by Delivery Hero) that users don’t just want many things, they want them now without any hassle. So we are the pioneer to initiate the idea of Quick Commerce globally, with the aim to deliver not just food, grocery but many other things to customers with ease, in the matter of minute, 24/7.

What are three factors that you feel are fuelling this? 

• New younger consumer generation (Late millennials and GenZ): easy-going with consumerism and faster adoption with new things

• Technology development: the proliferation and lower cost of smartphones and data cost

• Freelancing workforce increase: more and more people want to work with flexible schedule and income

The impacts of Covid-19 are an acceleration to the inevitable trend of food delivery in Vietnam.

What is the outlook for Vietnam’s food delivery market? 

Vietnam will still be one of the fastest growing markets in SEA, even in the world. The current food delivery penetration is only 3% of total population (in 2020), compared to 9% as in Indonesia. With the rapid expansion of Internet and smartphone, increasing personal income and investments, I believe VN can be in top 3 largest food delivery markets in SEA in 2025.

What are the future plans for BAEMIN - any exciting projects happening at the moment?

With plans to expand to new cities, BAEMIN hopes to serve more users across Vietnam and acts as a bridge to connect the locals with affordable and high-quality restaurants in their areas, to help them enjoy great food at the location of their choice. BAEMIN will also invest in activities such as CSR and community enhancement that bring the benefits for their partners and the community. Also we will try to embrace and adapt other best market practices to VN.

What can we expect to come from BAEMIN in the next 5 years?

I would encourage everyone to follow us closely on social media, we will be striving for excellence and pursuing many exciting initiatives to nurture the food ecosystem in VN.

Jason Chu, Head of Merchant Business Development at BAEMIN

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