[Korean Startup Interview] Mukkebi: A Public-Private Partnership Delivery App Challenging Korea’s Oligopoly Giants
In 2020, GYEONGGI PROVINCE in Korea introduced a public delivery app to prevent small business owners from being burdened by the excessive commission fees charged by private delivery services. This initiative quickly became a significant countermeasure to protect the interests of small businesses and consumers alike.
Launched with the goal of fostering a fair competitive environment and promoting a cooperative economy, this public delivery app project challenged the monopolistic dominance of private delivery services through a collaborative effort between the public and private sectors. Mukkebi, an early adopter of this ambitious public delivery app initiative, has been actively working to counteract the dominance of a few major delivery app platforms. By offering optimal commission fees and minimal operating costs for small business owners, Mukkebi has built a delivery app infrastructure and secured official business rights from 12 local governments, providing nationwide delivery services.
Founded in 2017 by CEO Kim Joo-hyung and his brother, Mukkebi proposed a delivery app strategy that involves collaboration between the public sector and private companies to local governments and government agencies, leading the charge in implementing public delivery apps. Leveraging the trust and credibility of being an official business operator backed by local governments, Mukkebi has expanded its franchise network across the country, strengthening its foothold in the fiercely competitive delivery app market with strong support from small business owners.
In the face of increasing competition among delivery platforms, Mukkebi differentiates itself by lowering fixed costs to provide more efficient service. By focusing exclusively on delivering quality service and leveraging seven years of experience, Mukkebi has developed a delivery system optimized for efficiency. With the largest number of public delivery app business rights in the country, it has minimized marketing costs through local government support and enabled payments with local currency and Onnuri gift certificates, capitalizing on the public delivery app’s advantages. Moreover, by offering a free delivery option funded by the savings from lower commission fees compared to competitors, Mukkebi plans to dramatically increase its market share by progressively rolling out free delivery services in various regions.
Thanks to these strategies, Mukkebi has achieved remarkable outcomes, including 1.7 million app downloads, 95,000 franchise stores, and 950,000 members. It has also been selected for the Kyungpook National University Technopark‘s Startup Leap Package program, receiving further support to enhance its services, including the development of delivery app services for traditional markets. As it seeks its first round of investment since its inception, Mukkebi emphasizes its unique position as the only viable alternative in the imbalanced Korean delivery app market.
CEO Kim Joo-hyung of Mukkebi stated, “We have always strived to stay lean and adapt flexibly to the market dynamics. Our confidence in this business model has allowed us to operate without external investment for over six years. However, facing the challenges ahead, we believe it’s time to seek external investment for the first time. Despite initial doubts, now in our seventh year, we are witnessing even more growth.”
He added, “By opposing large delivery platforms that have lost consumer and franchisee trust due to their high commission fees, we aim to rebalance the market,” expressing his commitment to leveraging government support for cooperative policies and the prospective unicorn system for accelerated growth.
What issue is the Mukkebi team addressing?
The Korean food delivery platform market, valued at an annual KRW 30 trillion, is controlled by a few dominant companies. These platforms exploit their position by charging exploitative commissions to their vendors, which not only burdens these small businesses but also leads to increased costs for consumers, contributing to inflation.
The pervasive issues of delivery charges and high commission fees, frequently highlighted in the media as a social concern, mirror the current state of the market. There’s a pressing need for an alternative solution to address and rectify these problems, as the discontent within the delivery app market grows.
The oligopolistic nature of these delivery app platforms, with their expansive operations and aggressive fee strategies aimed at revenue growth, has evolved into a significant economic and social dilemma. Mukkebi stands as a delivery app platform company equipped with a nationwide infrastructure ready to tackle these challenges.
How does Mukkebi propose to solve this problem?
To foster a sustainable ecosystem for delivery apps, Mukkebi has established an infrastructure with optimal fee policies and minimal operational costs. Entering the delivery app platform market comes with high barriers. Mukkebi overcame these by being the first to propose a public-private cooperative delivery app strategy to local governments and government agencies, sparking a nationwide movement towards public delivery apps. Furthermore, by acquiring official business rights from 12 local governments, Mukkebi has laid down a comprehensive national service infrastructure.
Mukkebi has been able to cut down on marketing expenses with the support of local governments over the years, leveraging its credibility as an official business entity to expand its franchise network and consumer base nationwide. Despite the high entry barriers, Mukkebi has carved out a significant presence in the market and plans to seize territories unexplored by leading delivery apps due to their prohibitive fee structures through diverse differentiation strategies.
For instance, whereas Company B might charge a 30% fee, Mukkebi’s fee stands at merely 1.5%, creating a significant fee difference of 28.5%. Even if only a fraction of this difference is passed on as delivery fees, it renders Mukkebi’s service more affordable, paving the way for marketing strategies around ‘free delivery’. This initiative is already in effect in select areas, positioning Mukkebi as the top delivery app platform. Mukkebi’s fee structure inherently positions it as a more affordable option compared to monopolistic platforms.
What competitive and technological advantages does Mukkebi have over its rivals?
Firstly, we’ve significantly reduced fixed costs. While our competitors have grown into large organizations with hefty yearly fixed expenses, Mukkebi, thanks to efficient operational know-how, has kept a lean structure and minimized fixed costs, ensuring service sustainability. We concentrate solely on the core functionality of delivery, not diluting our focus with diversification, thereby offering a structural service quality advantage.
Secondly, over seven years in the domestic market, we’ve developed an optimized system through relentless trials and enhancements. Our in-house technology has enabled us to establish an optimized delivery app platform and a comprehensive operation management system, covering everything from app services to integration with the majority of rider companies nationwide and franchise POS receipt programs.
Thirdly, holding the most public delivery app business rights across the country allows us to receive substantial marketing support from local governments. As the frontrunner in the public delivery app sector, Mukkebi strategically utilizes marketing funds provided by 12 local governments, which range from KRW 100 million to KRW 2 billion annually.
Fourthly, the ability to process payments with local currency and Onnuri gift certificates offers distinct advantages of public delivery apps, such as ‘5-10% discounts with local currency’ and ‘10% off with mobile Onnuri gift certificates’, securing a dedicated fan base.
What services does Mukkebi provide?
Mukkebi offers a food ordering intermediary service under its brand, boasting 95,000 franchise stores nationwide and approximately 900,000 regular members. With an innovative 1.5% brokerage commission policy, Mukkebi has secured official public-private cooperative delivery app business rights from 12 local governments, achieving a transaction volume of KRW 62 billion and revenue of KRW 3 billion in 2023.
Who are your target market and core customers?
The delivery app market, a vast sector with an annual value of KRW 30 trillion, is Mukkebi’s playing field. Our aim is to carve out a share from the existing oligopoly, targeting core customers with unparalleled services and user-centric platform policies. We have a deep understanding of both consumers and restaurant owners’ needs.
Can you describe Mukkebi’s business model?
Our model is based on a 1.5% order brokerage and approximately a 1.5% payment processing fee, totaling 3%. With an average monthly transaction volume of KRW 6 billion, this model generates commission revenues of KRW 180 million. Besides, we’re expanding into commerce and ingredient supply sales. Our primary focus is on leveraging the delivery app’s positive impacts, aiming for KRW 15 billion in monthly transactions by the first half of 2024.
One standout strategy is our “free delivery” service. Thanks to the difference in commission fees with our competitors, we’ve obtained voluntary agreements from franchises for a free delivery policy. Our competitors’ high-fee policies make it impossible for them to offer similar incentives. Mukkebi plans to increase its market share dramatically by rolling out free delivery services region by region.
What makes the Mukkebi team competitive?
Interestingly, like “Woowa Brothers,” Mukkebi was co-founded by siblings. Our team’s strength lies in the core members’ commitment, having stuck together for 7 years without any departures. Our accumulated experience and extensive nationwide network form the backbone of Mukkebi’s success. Our team, united by a shared goal and bolstered by efficient work ethic, operates effectively with a lean workforce. Our operations are streamlined into essential departments such as development, design, planning, and external cooperation, all powered by our in-house technology.
How has the Kyungpook National University Startup Leap Package program contributed to your growth?
This program has been instrumental in developing delivery app services for traditional markets, fulfilling a significant need requested by local governments.
Why should we invest in Mukkebi? Here are three reasons:
First, Mukkebi stands as the sole, ready alternative in Korea’s imbalanced delivery app market, characterized by high entry barriers and limited players. Despite the lost trust in major companies like Baemin, Yogiyo, and Coupang Eats due to their high fees, consumers lacked alternatives. This imbalance is bound to correct itself over time.
Second, many large corporations, inspired by Coupang’s success and eager to enter the delivery app market, are envious of Mukkebi’s infrastructure. Some are already in discussions with us. Mukkebi maintains a straightforward ownership structure, with one representative holding 100%.
Third, this investment will enable us to utilize the preliminary unicorn system. While our focus has been on business development rather than investment attraction, the government now recognizes platforms like Mukkebi as part of a digital SOC, fostering platforms with co-prosperity policies. We believe we have a strong chance of selection, given the potential impact.
Fourth, we can implement strategies that are unfeasible for our competitors due to their operational and fee structures. There must be reasons why a small venture like us has not only survived but thrived in a market where giants have failed. This, we believe, makes Mukkebi a worthwhile investment.
Finally, a message to our readers and investors:
We ask for your understanding that we cannot disclose our secret weapons, as our innovative ideas have been repeatedly appropriated by competitors in the past. We welcome your interest and invite investors to contact us for more detailed explanations.
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