It may seem counter-intuitive, but Indonesian superapp Gojek’s withdrawal from the Thailand market, announced last week, could end up aiding its regional expansion.
The plan to sell the Thailand business to Malaysian budget carrier AirAsia will free up resources for Gojek to focus on Southeast Asia’s more lucrative markets — Vietnam and Singapore, to start with, said analysts DealStreetAsia spoke to.
“In some ways, that [the sale of Thailand operations] makes it easier for Gojek to push ahead with regional expansion, without having to commit the same level of capital expenditures and resources,” said Angus Mackintosh, an analyst at CrossASEAN Research.
Gojek’s Thai business, which includes ride-hailing, food delivery, and payments, was a minor overseas operation. It had posted two consecutive annual losses in 2019 and 2020, Reuters had reported citing accounts provided at the time of the AirAsia deal.
According to a recent DealStreetAsia DATA VANTAGE report titled Food Delivery platforms: SE Asia’s Race to Deliver, Gojek’s Gross Merchandise Volume (GMV) in food delivery was behind rivals Grab, Foodpanda, and LineMan in Thailand last year. Fending competition from Grab, estimated to be the leader in six markets in the region, will be a tall order for Gojek.
Another concern is the regulatory oversight in Thailand. Last October,Thailand’s Office of Trade Competition Commission approved guidelines to regulate online food delivery platforms, aimed at preventing unfair trade practices such as unreasonable income-sharing charges and exclusivity arrangements by food delivery platforms.
To be sure, Gojek will still have a presence in Thailand. The $50 million stock-swap deal with AirAsia gave Gojek a 4.76% stake in the airline’s lifestyle platform. “Although Gojek only has a small stake in AirAsia Digital, it might be increased over time. It could be used as a vehicle to expand, either in Malaysia… or the two could possibly team up in Singapore,” said Mackintosh.
Doubling down on Vietnam, Singapore
In an exclusive chat with DealStreetAsia, Gojek’s chief food officer Catherine Sutjahyo said the firm is increasing its investments in Vietnam and Singapore, as it identifies the two markets as strong sources of growth and the best fit for Gojek’s international business overall.
“The investments include increased driver and merchant acquisition initiatives, enhancements to user experience as well as launching new products and services,” Sutjahyo said, adding that the core services of payments, transport, and food delivery will be rolled out bearing in mind local customer needs.
For now, Gojek will focus on Vietnam and Singapore alone, rather than spending time and resources in other SE Asian markets such as Malaysia, the Philippines, Myanmar, and Cambodia, which were earlier on the target list.
The Philippines and Vietnam seem to be the most obvious choices for Gojek’s expansion, said Mackintosh. After Indonesia, the Philippines and Vietnam are the second and third-largest markets in the region, with populations of 108 million and 96 million respectively.
Both countries are also underpenetrated in terms of financial services, marking a good business opportunity for Gojek’s payment services. There are 44 million unbanked people in the Philippines and 49 million unbanked people in Vietnam, according to a recent report by Google, Temasek, and Bain.
However, Gojek’s application for a ride-hailing licence was rejected twice by authorities in the Philippines, citing foreign ownership concerns. Ditto for Malaysia, where in early 2020, Gojek was granted only limited access for its bike-hailing service for six months.
In Vietnam and Thailand, on the other hand, Gojek has successfully rolled out many operations.
More recently, in Vietnam, Gojek is offering free rides to COVID-19 vaccination sites around Ho Chi Minh City. As a result, it claims to have gained around 50-70% increase in orders and a three-fold growth in completed orders in key districts. Gojek also plans to bring the car ride-hailing and cashless payments services to Vietnam in the coming weeks, while it is stepping up the investments in GoFood to drive demand and attract more merchants to the platform.
In Singapore, Gojek has operated only the car ride-hailing service, GoCar, since late 2018. It launched GoTaxi, a taxi-booking feature within the app in May 2021. To increase order volumes, Gojek is now offering free or discounted rides to and from COVID-19 vaccination sites for all users, claiming to have clocked more than 50% growth in order volumes and 25% growth in daily active drivers since early May.
In Vietnam and Singapore, though, Gojek faces stiff competition. “They [Gojek] can follow the same route [like they did with AirAsia] or find other creative means. They can’t beat incumbents unless they have better access to capital,” said Jianggan Li, founder and CEO of the investment consultancy Momentum Works.
Compared to Grab, which grew organically in all markets in Southeast Asia, Gojek became big in Indonesia before expanding to other markets. Hence, organisational structure, people, and products will emerge as fresh issues for Gojek as it expands. It is similar to how Alibaba’s expansion in Southeast Asia was not so smooth, Li explained.
Prime focus on Indonesia
The ambitious expansion plans notwithstanding, Gojek, which merged with Indonesian digital marketplace Tokopedia recently, will first and foremost focus on Indonesia, which is estimated to have a $124 billion GMV digital economy by 2025, the largest in Southeast Asia.
Northstar Group managing partner and co-founder Patrick Walujo said Indonesia is the most important market, where Gojek and Tokopedia (GoTo) will always focus. “The reason why we are going overseas is that we wanted to become a strategic beachhead, to keep the competition up…(and) subsidise the Indonesian business from the profits of non-Indonesian markets.”
While Indonesia remains competitive given the presence of Grab, and the upcoming entry of Shopee in food delivery, Gojek has a natural advantage as a local homegrown player that can take advantage of the “nationalistic-pride” among Indonesians, said Mackintosh.
With Tokopedia now part of the equation, the potential captive market has become even more significant as the combined ecosystem under GoTo boasts more than 100 million monthly active users, 11 million merchant partners, and $22 billion in gross transaction value in 2020.
Gojek also has the upper hand over Grab in the digital banking space, since the former has invested in Bank Jago. “It is important to note that Gojek is ahead in digital financial services as Grab doesn’t have digital payments in Indonesia. Yet, the market is dynamic, and I think Grab can still catch up,” Mackintosh added.