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What the U.S. and Europe can learn from South Korean On-Demand Startups

The U.S. has been having a lot of problems lately with their on-demand startups. From the rise and fall of such startups such as Homejoy and Zirtual, Uber's ongoing legal frustrations and various identity crises (it is a limo service, taxi service, same-day delivery service, eCommerce marketplace?) to Sprig and Instacart's about-face and turning their contractors to employees, the on-demand startup has gotten a lot of press coverage and VCs have been jumping on the bandwagon, often funding clone companies in this crowded space.

A ubiquitous sight in South Korea: the delivery scooter that zooms everywhere. U.S. chains, such as McDonald's and KFC have discovered to stay competitive in the restaurant market in South Korea, that they need to integrate their own delivery service. 

Having restaurant food delivered is a relatively new thing for Americans (with the exception of pizza) whereas in South Korea, it has been naturally expected that every restaurant integrates a delivery service since the late 1980s. Even the McDonalds in South Korea has a free McDelivery service as the company discovered that to stay competitive in the Korean restaurant market, delivery is a must, not an option. South Korea, has a geographical size similar to Great Britain- with just as many crowded urban centres, with wide expansive countrysides where many empty spaces are being filled with Samsung and LG funded concrete condos. Due to the nature of the lack of space, Koreans have a temperament that is similar to Americans- with impatience being at the top of the list. Speed and fast transactions and services are automatically expected, from internet connectivity to food delivery.

Recently, South Korea also launched KakaoTaxi- a free service for users and taxi drivers to connect to a licensed taxi without having to pay a fee for a CallTaxi- which is the national standard in taxis in South Korea. The Uber market doesn't really apply to South Korea since taxis are already quite inexpensive and they are plentiful everywhere. Currently, it's been reported that KakaoTaxi simply gathers information about user trips, and perhaps in the future it might be possible to pay trips with KakaoPay; however, it doesn't take the huge commission as Uber does with its "contracted" drivers since they utilise people with licensed taxis, similar to Hailo. (I wonder if Hailo would ever consider launching HailoPay and making a Plan B into a credit card/ frequent traveller service? What if HailoPay could give users discounts on trips, restaurants and hotels and credit towards travel miles? Hmmm.)

Whereas American and European on-demand startups hire their own contractors/ employees to make the deliveries, Korean startups simply organise the information and act as more of a centralised directory. Since Korean restaurants all utilise their own delivery people as part of their staff, and a delivery person riding a moped with the company logo is a common sight in any part of South Korea; on-demand food delivery services such as Baedal Minjok actually do not deliver any of the food themselves, instead they send the order to the restaurant with their own delivery scooter or moped. Restaurants can purchase or lease a delivery moped from a company that specialises in them and can even opt for monthly maintenance. The delivery person is a direct employee of the restaurant, therefore, he or she is under the same protections as any of their other employees, and the on-demand startup merely aggregates their data, lists them in their directory, allows users to interact and give ratings and reviews and takes a commission fee from the listed restaurant. 

Baedal Minjok, the popular on-demand app launched in 2010, only serves as a directory of restaurants to directly order from and does not personally deliver food

In Korea, one can ring up any restaurant, make an order and have food delivered within one hour. However, because there are so many restaurants to choose from, a centralised directory listing all the restaurants have become more popular and Baedal Minjok was one of the first to digitalise their directory in 2010 and make it available for people to comment on and rate.

Whereas GrubHub, DoorDash, Caviar, PostMates, Shyp, Washio and other similar on-demand companies have been sued for worker classification, Baedal Minjok avoids this altogether due to the nature of South Korea's restaurant infrastructure in which all restaurants already are in possession of their own delivery service scooters.

Perhaps if we take South Korea's lead, and the US and UK integrated a scooter delivery vehicle service and maintenance for restaurants so that restaurants could rent or buy delivery scooters instead of asking their delivery people to use their own cars, insurance and gas for delivery services, and also give restaurants a database of potential delivery people they could hire from, restaurants would suddenly find that they would increase the number of customers and orders whilst solving the U.S. litigation problem. After all, one of the most annoying things about dining out in the U.S. is simply finding parking and paying to garage your car or keep an eye out for the meter police whilst trying to dine at a local restaurant. And due to all the congestion taxes and lack of parking in the UK, let's not even fathom driving somewhere to dine at a restaurant in London. The lunch crowd typically sticks to local places where they can quickly order and eat within walking distance of their offices, but forget about satiating your appetite for a veggie fritter burger from Honest Burgers if you're in the Green Park or Bank area because the nearest location is in Soho or Clapham- way too far to travel for the London mindset for a simple lunch. Deliveroo has partially addressed this issue, offering local delivery services in under an hour, but they also suffer from the same failings as U.S. on-demand startups, in that they hire their own delivery people with their own scooters and bicycles. 

The landscape of lawsuits aimed at On-Demand food startups in the U.S. has caused an area ripe for disruption. Scooter purchasing/ leasing services + database of potential delivery hires for restaurants? 

A delivery service, similar to South Korea's, could apply to a 5 mile radius, and the restaurant could treat the delivery person as a regular employee, and customers would have access to all the local cuisine they would not normally have because they are too lazy too drive their cars and find parking, or have to take time off work to pick up the delivery, which still includes driving and finding parking or having to take public transit without having to pay excess delivery fees. However, in the U.S. and Europe, delivery is the sole responsibility of the on-demand startup, a feat that has been pinning the working class in legal dispute with the entrepreneur class, and perhaps taking a lesson from our Far Eastern neighbours- South Korea could prove that there is one more key to the puzzle that could prove to be a happy medium for all.

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