Round 2 of ride-hailing battle taking a different route

Grab and newcomer Gojek will likely present their value proposition through product differentiation

Singapore

THE bell has sounded for Round 2 of the battle between ride-hailing firms in Singapore, with Indonesian startup unicorn Gojek rolling into town with the launch of its beta app on Thursday. But these are not the days of Grab versus Uber. With opposing sides now in Super App mode and regulations sparking a shift of power back to the people, the industry is in for an interesting ride.

"Round 1 was about quick grabbing of market share through a price war," said Patrick Yeo, PwC Singapore's venture hub leader. "But players in this round will present their value proposition through product differentiation."

Since Grab's founding, the company has grown from being a ride-hailing app to offering a suite of services including micro-loans, an e-wallet with a remittance service, food delivery, and a marketplace for bikes and e-scooters.

Gojek is not shabby on that front either, wooing consumers with delivery, cleaning, entertainment and massage services.

In an interview with CNBC in June, Gojek founder and chief executive Nadiem Makarim said that one of the lessons learnt from Uber's failure in Asia was that it is extremely hard to defend a single vertical. In order to retain and engage a user, you need to cut across multiple moments in their transaction life, he said.

"Now if we launch a new product on our platform, our user acquisition to that next service approaches every time because we're just converting existing users to try a new thing, then a new thing, then a new thing, so the cost of acquisition of every new customer for every new vertical for us continues to drop," said Mr Makarim then.

"That is a very positive cycle. So the more verticals you layer on to this platform, the more your monetisation, and the higher your return on every customer that you bring on to the platform."

For now, Gojek's beta app will only offer ride-hailing services to batches of users, but president Andre Soelistyo confirmed that the company has every intention of integrating more offerings, such as food delivery, on the full version of the app, expected to launch in early 2019.

Mr Soelistyo said research into the food vertical by its Singapore team is still ongoing. But he emphasised that Gojek's unique proposition would be its focus on a wide selection of choices.

"Eighty per cent of our merchants come from the mom-and-pops instead of the McDonald's and KFCs of the world," he said.

As the fight heats up, industry watchers are expecting Gojek to give Grab a run for its money because, unlike Uber, Gojek is coming onto the scene armed with more regional experience.

Brijesh Pande, managing partner of Tembusu Partners' ICT Fund, said: "Most consumer Internet startups are able to get the strongest momentum in their home markets because UI/UX design and logistic integrations such as payments and drivers are well understood by the companies in their home markets."

Also new to this round of competition is the presence of large corporations in bed with the Super Apps. Grab and Gojek both announced strategic partnerships with local banks during the Singapore FinTech Festival this month - Grab with UOB, and Gojek with DBS Bank. At the launch of the beta app on Thursday, DBS affirmed its commitment to provide local expertise to Gojek.

Gojek's entry into Singapore has been highly anticipated by consumers after Uber was swallowed up by Grab in March this year when the US firm's South-east Asia operations were acquired after a battle for market share, which also saw local taxi firms thrown into the fray.

Analysts watching the SGX-listed ComfortDelGro largely agree that Gojek's entry into the transportation market would have a less significant impact on the company's operations in the short term, compared to the first round of the ride-hailing war.

Nevertheless, ComfortDelGro's shares plunged 6.78 per cent earlier this month on fears of Gojek's entry. A report by UOB Kay Hian analysts Foo Zhi Wei and Andrew Chow asserted that the concerns are overblown.

"We have strong grounds to believe that Gojek intends to maintain an asset-light strategy in Singapore, as evidenced by their partnership with six car rental companies on Oct 18," said the report. "Furthermore, their focus will likely be positioning themselves as a lifestyle app, with transport services a means to provide those services."

Talk of Gojek in discussions with ComfortDelGro over a partnership surfaced in April. The company did not confirm or deny the rumour, but told BT on Thursday: "We're open to partnering with any firm that will help us meet our supply and strategic needs."

Uber's merger with Grab appears to also have caused a ripple in the playing field when the Competition and Consumer Commission of Singapore (CCCS), in addition to slapping the firms with a S$13 million fine, ruled that Grab had to cease all exclusivity deals with drivers or taxi fleets.

Although the CCCS said that other ride-hailing platforms and taxi operators can form exclusivity deals, Gojek said on Thursday that its drivers in the beta phase are not subject to such a clause in their contracts.

BT understands that there are currently no plans to make the Gojek-driver relationship exclusive even after the beta phase.

"After the exclusivity issue was highlighted by CCCS, the drivers would be aware and unlikely to accept exclusivity with Gojek unless the terms are very attractive, in the spirit of fair play," said PwC's Mr Yeo.

With users having more ride-hailing choices after Gojek's entry, and drivers appearing to gain more autonomy, the power now seems to have shifted back from the businesses to the people.

So who will win? For now, the answer perhaps lies in the player that can best serve.