Opinion: How Go-Jek can beat Grab for the SEA ride-hailing throne

Photo credit: Go-Jek

When Nadiem Makarim first met Anthony Tan at Harvard Business School, he likely never anticipated that despite being chums, they would soon become fierce business rivals. In just a few years, Makarim’s Go-Jek and Tan’s Grab are now in a fabled two-horse race to dominate Southeast Asia’s ride-hailing and on-demand services.

With Uber out of the picture, Go-Jek is now intent on expanding across the region and entrenching on Grab’s turf. Aside from Singapore where they’ve already established a data science team, Go-Jek has reportedly been recruiting for operations in Vietnam, Thailand, and the Philippines.

But the question persists: Will Go-Jek’s playbook work in other countries outside of Indonesia?

Capturing the crown jewel

Uber’s recent exit from Southeast Asia has only fueled the rivalry between Go-Jek and Grab. But Go-Jek remains the dominant player and local champion in the region’s crown jewel, Indonesia. It’s no surprise, as it ticks all the boxes of a local success story:

• The startup was founded by a native Indonesian.
• It tackles a major pain point in the society.
• It creates a lot of new jobs.
• It generates an immeasurable level of value for both merchants and citizens alike.

Although Go-Jek started with on-demand rides, their initial underlining play was always centered on logistics. Unlike developed markets such as the US and Europe, Indonesia lacks critical infrastructure and public transportation systems. This fact alone justified the introduction of courier and food delivery services shortly after the app’s launch.

In just three years, Go-Jek has become the largest food delivery business in Indonesia and the second largest in the world after China, claims their CMO. It has also diversified into on-demand cleaning, beauticians, auto repairs, and massages under their lifestyle arm, Go-Life, which is now one of their most profitable products. And true to their rising “super app” status, the Indonesian darling is now reportedly taking on video streaming with the recent launch of Go-Play.

The addition of Go-Pay, their mobile payments platform, also played a pivotal role in Go-Jek’s continuous expansion in its home market. Indonesia is the fourth most populous and the second largest cash-based country in the world, and Go-Jek was first to introduce non-bank top-up options for its digital wallet. The platform now accounts for 30 percent of all e-money transactions in Indonesia.

With Indonesia slated to comprise 52 percent of Southeast Asia’s ecommerce market by 2025, Go-Jek is already coming from a strong position. But if they don’t plant the seeds for regional expansion now, especially with the gaping hole left behind by Uber, the remaining 48 percent will surely slip through their fingers.

Obstacles lie ahead

Go-Jek’s first foray abroad is still likely to be met with ample amounts of cultural, market, and regulatory pushback.

For starters, the name Go-Jek is a play on the Indonesian shorthand for motorcycle taxis, ojek. It simply doesn’t translate. Although trivial in nature, this also shines a larger spotlight on the fact that Go-Jek’s management team is largely comprised of Indonesians who are, of course, based in Indonesia.

Grab by contrast has snatched up high-level officers from global companies, such as Google and Microsoft, to form a formidable class of executives with experience in market expansion at scale.

In my previous analysis of the Grab-Uber deal, you’d see that effectively conquering the commoditized ride-hailing business comes down to a roughly 80-20 split between capitalization and localization, respectively.

From a capitalization standpoint, Grab exceeds Go-Jek’s war chest by around US$2 billion. Exactly how much of that has already been deployed is unclear. In terms of localization, Grab also maintains a clear advantage given its long-standing foothold in Southeast Asia.

Although Grab wins on both counts, Go-Jek is not without its advantages. As competition drives down prices and increases quality, users—and regulators for that matter—are likely to embrace new incumbents. The Indonesian unicorn will also likely attract much more investor interest as their regional expansion gains more traction.

Two plays

There are then two parallel plays that would serve to bolster Go-Jek’s Southeast Asia conquest. The first is going head to head with Grab in ride-hailing and food delivery, which will likely become a long and drawn-out battle financed by an ever-expanding list of deep-pocketed investors.

That said, Go-Jek has been faster and arguably more successful at expanding horizontally to on-demand services outside of food and transport, including logistics, medicines, groceries, and entertainment. This also provides many more use cases and incentives to help maximize consumer adoption of its digital wallet, which serves as the key consideration when winning over merchant partners.

In the highly commoditized and price-elastic business of ride-hailing, Go-Jek’s “one app for all your needs” approach might just be enough to tip the scales in its favor—a strategy that their investor, Tencent, might know a thing or two about.

The second play focuses on expanding its lifestyle and professional services arm, which currently operates outside Grab’s scope. Launched as a separate app since last year, Go-Life already boasts 3 million users across 25 cities in Indonesia. It is also supposedly on track to split into a separate business entity and raise its own funds.

It remains to be seen exactly how big the opportunity is for these services outside of Indonesia, but there’s clearly some demand given the handful of startups operating in this space. If not through ride-hailing, Go-Jek could conceivably use its leverage to lead several strategic acquisitions and very quickly make a splash in Southeast Asia via Go-Life.