Examining Grab’s incentive-fueled growth

Singapore-based Grab snatched the headlines yesterday when it finally went public on Nasdaq via a merger with Altimeter, a special purpose acquisition company. The super app raised US$4.5 billion during the listing process.

However, Grab’s financial data for the third quarter of 2021 shows that the growth of a majority of its services in Southeast Asia is still fueled by incentives, either in the form of additional fees for drivers and merchants, or discounts for consumers. Those incentives, which exclude the base commission for drivers and merchants, reached US$421.7 million in Q3 2021, an 85% jump compared to the same period last year.

The company has been maintaining the incentives for its mobility business, which includes ride-hailing services, even though the segment’s revenue kept declining due to the impact of the pandemic.

However, the incentives for Grab’s delivery business are increasing, despite its stagnant revenue growth. The company spent US$347.9 million for incentives in deliveries, which amounted to 15% of the segment’s gross merchandise value (GMV).

While the GMV of the deliveries segment grew by 63.2% compared to the same period last year, the incentives jumped by 79%.

The same thing happened for the firm’s enterprise and new initiatives segment, which saw its incentives as a percentage of revenue continue to increase every quarter since the beginning of 2021.

Financial service is the company’s only business segment that showed a positive trend. It has seen an increase in revenue in the third quarter of the year, while also reducing its incentive expenses.

In previous years, Grab has tried to push down its incentives, especially for its mobility business. In a statement, the company said that it may continue to seek to reduce incentives as it achieves greater scale, which can bring a good impact for its profitability and growth.

Source: Grab