Grab and GOJEK, the two strongest Southeast Asian ride-hiring services, will focus their resources on their ancestral businesses of car dispatch, delivery and payment. Due to the impact of the new coronavirus, both companies have decided to reduce their workforce for the first time since their founding about 10 years ago and are withdrawing from their non-core businesses.
The “Super-app” concept, which provides a full range of lifestyle-related services, was forced to be reviewed.
Grab and GOJEK announced in succession in June that they would be laying off 5% (360 employees) and 9% (430 employees), respectively.
Since February, the business environment has changed dramatically with the COVID-19. The use of the service has plummeted due to restrictions on behavior by governments.
GOJEK will end its lifestyle-related services that require human contact, such as massage and cleaning services, at the end of July, and will also pull out of food court operations.
Grab has also stated that it will withdraw from non-core businesses. Both companies will focus on ride-hiring services as their core business. This is because home delivery and payment, which are part of the core business, would not be possible without drivers. Drivers are responsible for home deliveries as demand for stay-homes surges, and even with cashless payments, drivers are often responsible for cash charge services in Indonesia and other countries. Both Grab and GOJEK have millions of drivers and are forced to deal with the difficult task of retaining passengers while supporting them in terms of infection control and income.
Source: The Nikkei (The original article was partially revised by the author.)
PSR Analysis: The rate of growth that GOJEK and GRAB have shown in Southeast Asia has been very fast, with both companies growing to a market capitalization of $10 billion in just around 10 years.
Part of the reason why they have been able to grow so much in many Southeast Asian urban areas where infrastructure is still weak is that they have created many business opportunities and jobs, thanks to the high rate of motorcycle ownership and smartphone penetration.
The review of the two companies’ businesses will spill over into the food and beverage industry and various service businesses. The demand for their root business, ride sharing and delivery, is strong and the strategy of returning to the ancestral business is the right one.
In the long term, the ride-sharing delivery business will be a growth industry in the new normal era. I predict that this will be the case. And this trend will support demand for motorcycles in Southeast Asia at the bottom. PSR
Akihiro Komuro is Research Analyst, Far East and Southeast Asia, for Power Systems Research
