High inflation poses danger to Grab, Gojek, Foodpanda – and their merchants too

Marlon, a Grab food delivery rider in the Philippines, says he can take home about 1,000 pesos (US$19.09) a day if he makes about 15 trips. But higher fuel costs are eating into his earnings. A day’s worth of deliveries now costs 300 pesos in gasoline for his motorcycle, 67% higher than the average 180 pesos before the price surge started in late February.

A Grab driver on the streets of Ho Chi Minh City

Stories like Marlon’s are common. This year, higher global oil prices have hit the pockets of app-based drivers and riders who pay for their own fuel. The cost of food is also going up. Soaring commodity prices will likely be paired with slower economic growth in the months ahead.

This will affect consumer tech platforms like Grab, GoTo, and Foodpanda, which will have to balance stakeholders with competing interests, like investors, consumers, driver and delivery partners, and governments.

“The money I could have set aside could no longer be set aside,” Marlon says in Filipino, adding that this makes it hard to buy food. “The effect is big. 120 pesos is a big deal.”

He says he has not yet received any assistance from the government but has some access to fuel discounts through Grab’s partnerships.

However, these fuel discounts may make little difference. Mark, who also delivers food for Grab, says he can get a 4 peso discount per liter at a particular gas station but that he could also find another station that sells gas cheaper without the discount.

“I’m hoping Grab could give us higher incentives. That would really help.”

The push and pull over incentives

Yet, in the second half of this year, Grab actually plans to taper the incentives used to attract drivers.

Total incentives offered to drivers and merchant-partners in the deliveries segment for Q1 2022 was US$169 million, 44% higher than the US$117 million for the same three-month period a year earlier. Meanwhile, total incentives offered to drivers and merchant-partners in the mobility segment for the first quarter this year amounted to US$47 million, more than double the US$22 million given a year earlier.

See also: Grab’s financial health in 9 charts

During the company’s 2022 Q1 results call, CEO and co-founder Anthony Tan spoke of what the company was doing to address the gap between sharply rebounding mobility demand and a shortage of drivers. 

Part of this would involve increasing incentives for riders. However, Tan said he expected “mobility supply to stabilize in the second half of the year with driver incentives as a percentage of GMV tapering in that period.” 

This is what investors want to hear, even though its riders would prefer receiving more help. 

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