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Grab CEO Anthony Tan / Photo credit: Grab

Grab’s purchase of Uber’s Southeast Asian business is now official. Here are the details:

  • Grab has bought Uber’s ride-hailing business as well as its food delivery business, Uber Eats. That’s major.
  • Grab will take over Uber Eats’ operations immediately.
  • As part of the deal, Uber now owns 27.5 percent of Grab. According to a press release, this is reflective of their market shares.
  • By next quarter, Grab will expand its food delivery service, GrabFood, to the rest of Southeast Asia. It currently operates in Thailand and Indonesia.
  • In 2017, Grab grew 2.5 times in app downloads and four times in the number of driver-partners.

The deal is a win for Grab. It ends costly discount battles against Uber, allowing Grab to focus on chipping away at Go-Jek and GoPay’s lead in Indonesia.

The biggest coup, however, is arguably the food delivery business. Uber Eats is competitive against rivals Foodpanda, Honestbee, and Deliveroo, having snagged McDonald’s as a partner restaurant chain. It’s ranking especially well in the app stores in Singapore and Malaysia.

For Grab, transportation is just the beginning. Although high-volume, the margins are razor-thin unless you can get rid of the drivers and replace them with AI. Food delivery works the same way. Like traveling, food is a daily necessity. Grab probably won’t make a lot of money off food delivery, but that’s not the point.

By owning the platforms that serve two major consumer needs, it can collect a massive treasure trove of data that will allow it to shed its label of a ride-hailing firm and become the dominant ecommerce platform in Southeast Asia.

Key to its ambitions is building out all the infrastructure. It began with its ewallet GrabPay, which is now a mode of payment for many merchants in Singapore, not to mention the actual rides on Grab.

It then made a move into financial services when it announced that it will offer loans and insurance products to its driver and merchant network. Offering financial services to merchants will grease Grab’s network and keep the transactions flowing.

Financial services could also be where Grab makes its money. The marginal cost of expanding its loans and insurance offerings is arguably lower compared with rides and food delivery. That is because there is no need to expand a physical delivery network as the business grows.

Further, many labor-intensive functions of a financial services business can be automated. Credit scoring and claims are just two examples. With a ready customer base on the Grab network, the cost of sales can be reduced.

Treasure trove of data

Now with Uber Eats in the fold, consumers will have another compelling reason to use GrabPay, and Grab will have more customers to sell its financial services to.

The consumer data is key. Grab will have insight into consumer behavior that not even the tech giants and traditional institutions have. This gives it an advantage. Ecommerce giants like Amazon have transaction data, but they can’t collate consumer travel patterns like Grab can.

The biggest losers are probably the banks and insurance firms. While they have some understanding of consumer consumption patterns, they won’t be able to know, for example, a consumer’s favorite food or travel habits, let alone collate the data into market trends that will benefit Grab’s ecosystem. They could lose to Grab in certain segments of the loans and insurance business.

Grab still faces a lot of uncertainty in the years ahead. How will regulators respond to Grab’s rising dominance? Can it properly govern its use of consumer data and prevent a privacy fiasco from developing (like what’s happening now with Facebook)? Can it win in Indonesia? Can it compete against Alibaba and Tencent in Southeast Asia, which are arguably the originators of Grab’s current strategy? Can its loans and insurance business take off?

My money is on an eventual mega-consolidation with a Chinese giant firmly in the mix, which will certainly set the stage for a reckoning between states and the private sector down the line.

This post With Uber SEA purchase, Grab becomes a food delivery giant appeared first on Tech in Asia.

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