Superapp battle for Indonesia gets hotter as Grab & GoTo level up to take on Sea

Indonesia is poised for a three-way super app battle with Grab preparing for its US listing through a mega SPAC deal and Indonesia’s Gojek wrapping up its merger with e-commerce unicorn Tokopedia as they take on Southeast Asia’s most valuable public entity, Sea Group.

It is believed that the recent monumental moves of both Grab and the imminent Gojek-Tokopedia (GoTo) combine were driven, to some extent, by the trajectory of the Singapore-based Sea Group.

Sea’s direct access to public capital has enabled it to cash-burn its way to dominance, particularly in the most lucrative market in the region – Indonesia.

Since Sea Group set up its e-commerce entity Shopee in 2015, the NYSE-listed company has emerged as a formidable rival to anyone vying for market domination in the region, including Grab, Gojek and Tokopedia.

In a market where the digital economy grew five-fold to $44 billion in 2020, SEA Group’s e-commerce subsidiary Shopee has topped local champion Tokopedia as the most visited platform in the country, while its payment play, ShopeePay, is quickly upsetting the dominance of Gojek’s GoPay and Grab-affiliated OVO.

The latest crossover between the giants is the food delivery space, where ShopeeFood is slowly gaining a foothold in the game, which for long has been a two-horse race between GoFood and GrabFood.

However, with Grab’s imminent public listing and the Gojek-Tokopedia merger, many believe it will result in a level-playing field and change the dynamics in Indonesia’s super app battle.

“With the path to the public market, Grab and GoTo will receive new capital that will allow them to do more. The competition will continue as no one will be giving up on the Indonesian market potential. However, being public companies will require [them to frame] a new forward strategy, potential realignment of projects and market activities for both Grab and GoTo,” said Dave Ng, partner at Singapore-based VC firm Altara Ventures.

Food and finance

While Grab, GoTo and Sea nurture super app ambitions, they have built their foundation on different core businesses. Grab and Gojek set out as ride-hailing businesses focused on the SE Asia region and Indonesia, respectively, while Tokopedia is an e-commerce player. And, for Sea Group, e-commerce and gaming are its two major business lines.

As the three giants eye high-paced growth to justify their hefty valuations (Sea at $120 billion, Grab close to $40 billion, and GoTo reportedly targeting $40 billion), they are bound to expand and cross over to different sectors.

For the moment, however, the major verticals shared by the three are financial services and food delivery – both still very much up for grabs.

In the financial services space, it had looked like the battle lines had clearly been drawn out between  Gojek’s GoPay, Grab-affiliated OVO and Shopee’s ShopeePay. Gojek’s merger with Tokopedia, which owns a 36.1% stake in OVO, could change the dynamics.

DealStreetAsia had reported last week that Tokopedia was looking to divest its stake in the digital wallet OVO to Grab to safeguard its planned merger with the ride-hailing decacorn Gojek.

In digital banking, Sea was the first to make the move by building up a stake in small Indonesian lender Bank Kesejahteraan Ekonomi, better known as Bank BKE, in which it is now a majority shareholder. Gojek followed suit with its investment Bank Jago while Grab is understood to be on the verge of sealing a deal with another local bank.

Sea’s Shopee made a foray into the low-entry barrier food delivery space, dominated by Gojek and Grab, last year offering enticing incentives.

As part of its Ramadhan promo, for example, ShopeeFood is currently offering 50% discounts on selected merchants through synergy with ShopeePay, which is bound to increase the stickiness of the Shopee App. It also offers Rp1 meals every day from 4-6 pm.

Based on Grab’s disclosure, delivery makes up the largest revenue contributor for the company, generating 50% of consolidated revenue in 2020.

Source: Grab Investor Presentation

The fact that Grab’s delivery revenue grew from ZERO in 2018 to $800 million in 2020 suggests that a competitor, particularly a cash-rich one, may be able to grow at an equally rapid pace, potentially dethroning Grab from its claimed top spot in 2020.

With more than $4 billion private investment in public equity (PIPE) deal at its disposal, however, Grab is also expected to add its might in the food delivery race.

No e-commerce, no problem?

One sector where Grab is seeing a glaring gap compared to its two rivals is e-commerce. Gojek’s merger with Tokopedia, a former Grab ally, gives GoTo a significant e-commerce play to contend with Shopee, more than that offered by Gojek’s previous tie-up with e-commerce firm JD.ID.

For Grab, losing Tokopedia would mean losing some of its delivery business from Indonesia’s second-largest e-commerce player. To compensate for this loss, it is possible that Grab may look to secure deeper partnerships with other e-commerce players in Indonesia to grow its revenue.

The decacorn recently invested in Emtek — a media conglomerate and largest shareholder of e-commerce unicorn Bukalapak – which sparked speculation of potential strategic synergy between Grab and Bukalapak. 

An analyst from Singapore-based management consulting firm M2insights, who wished not to be named, believes that the likelihood of Grab allying with Bukalapak is low, given the different focus areas of the two companies.

Bukalapak, the analyst said, is Indonesia-focused and appears to be more engaged in its O2O play, which does not match Grab’s playbook.

“People in the investment industry think Gojek and Tokopedia deal is quite a strange alliance as well, but at least they can still brand it as an “Indonesia super app,” the person said.

Altara’s Dave Ng is of the opinion that not having an e-commerce play would not be a disadvantage for Grab and may actually be a “distraction” as it may not actually be net accretive to the group at this moment in time.

“In fact, if Grab were to go into the commerce space, the opportunity actually lies in building a social commerce platform, as that is a white space [there] rather than entering the already crowded e-commerce,” he said.

Southeast Asia’s own BAT

The advances made by Grab, GoTo and Sea to expand into different verticals in Indonesia and Southeast Asia draws parallels to the playbook of the Chinese tech titans trio – Baidu, Alibaba and Tencent (commonly known as BAT) – says AC Ventures partner YC Ng.

Like their Chinese counterparts, the three SE Asian giants will be looking to double down on their super app strategy and gain dominance in several niches.

The implication of this, some may think, is that it would leave very little space for other startups to scale in their respective verticals. However, the dynamics in China’s ecosystem suggest that may not be the case, YC said.

Despite the aggressive expansion of the BAT trio, China has seen the rise of the second layer of super apps in Meituan, Bytedance, Pinduoduo and Didi, which have captured select niches

“Giants, by virtue of being giants, need to primarily focus on metrics that ‘move the needle’. Consequently, areas/metrics that ‘move the needle’ for a $40-billion behemoth will less likely be a small but high-potential, fast-growing sector further down the line in most instances,” he said.

This trend is expected to unfold in SE Asia too. However, the smaller startups need to navigate their way around the giants, probably work closely with them, find synergies and eventually become frenemies, YC observed.

The ecosystem has already started to see startups scaling in verticals adjacent to those occupied by Grab, GoTo and Sea, prompting strategic partnerships and investments between them. In logistics, for example, SiCepat and J&T have partnered with Tokopedia and Shopee, respectively. In the fresh food segment, Sayurbox and Happy Fresh have been strategic allies of Tokopedia and Grab respectively. Health-tech startup Halodoc has partnered and secured an investment from Gojek.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.