Southeast Asia is setting itself up for disapointment with Go-Jek entrance
For Go-Jek, expectations couldn’t be higher for its international expansion. Can it possibly meet what people want?
Let’s just say the breakup has been difficult. Uber dumped us to “focus on myself” and, according to my social media, a lot of people are simply not being satisfied by their new partner. It’s not that this new relationship is bad, per se, it just isn’t delivering the bang for the buck.
Well last week, Singapore residents woke up to learn that a new kid named Go-Jek is moving to the neighourhood. It’s the hot gossip and many folks have mentally prepared to leave their current partner.
The problem is this new friend must now meet unrealistic expectations.
Because of its regional importance, a lot of people in Southeast Asia visit Indonesia frequently and are familiar with Go-Jek. So imagining the Jakarta-version of service being launched in Bangkok, Hanoi, Manila or Singapore is legitimately exciting. But that is a long way off.
The company is going to start with its ride-hailing service in outside of Indonesia, which means the do-everything feature that made Go-Jek a unicorn will have to wait.
It will be a lot like using WeChat outside of China — sure, it’s a nice way to communicate with friends, but it can’t really do anything else.
However, that’s going to be a minor issue compared to the supply/demand problem. Once Go-Jek goes live, it will almost instantly receive a tidal-wave of people downloading the app, but will it see an equally large wave of drivers?
A lot of the ride-hailing drivers are traditional taxis who were pushed into ride-hailing by market forces or business deals with their employer. A lot of these people reluctantly took-up Grab or Uber only to see the second company disappear. So can Go-Jek convince these same people to switch again?
Riders are fickle, but drivers are more loyal — in part because it’s a bit of a process to become a driver. There is a real possibility that it will hard for Go-Jek to poach Grab drivers, meaning it could become quite difficult to book a Go-Jek in the early days.
It is likely that drivers will be subsidised in the first few months in order to guarantee Go-Jek pays better than Grab. Most people are fairly easy to convince if the proposition is “you will make more money” but the process will still take time.
In the long-term, is subsidies the path Go-Jek wants to follow? There is not a race for market share like the industry saw a few years ago. Grab is well established, so Go-Jek will be trying to take territory, not marking a new frontier. If they start a price war, both Grab and Go-Jek will find themselves in an unsustainable financial situation and eventually one person will yell chicken and moves away from the on-coming train.
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This is what burned Uber out of Southeast Asia. Plus, based on their Q1 results, it seems like leaving Southeast Asia was the correct decision. The company turned a profit last quarter — although its a stretch to say the company is profitable because a major contributor was a US$2.9 billion injection from Grab and its sale to Russian rival Yandex.
For the consumer, the short-term may involve a lot of cheap rides, but eventually prices will need to rise and we inevitably start complaining that Go-Jek has gotten too expensive for the market.
Logistics is the real play
Some people think Go-Jek is not out de-throne Grab but rather will shift its attention towards the last-mile logistic industry. A strong piece of evidence is the strategic investment by Meituan-Dianping, which was basically an offline-to-online logistics provider in China before it shifted towards ride-hailing.
In the Philippines, Thailand and Vietnam this may work, but not in Singapore. The infamous services of Go-Jek (like massages, food delivery and movie ticket pick-up), were largely born out of terrible traffic. In Jakarta the roads became such a burden that people were willing to pay more to not spend three hours sitting in a jam.
Singapore does not have this problem and any reasonable person in the city-state would say the logistics services are fantastic. Go-Jek is entering Singapore to disrupt an old, clunky system. Rather, they would be entering a fast-moving, highly-flexible ecosystem where even traditional companies like DHL and SingPost are remarkably efficient.
From a startup perspective, while it is less consumer-facing than the success stories of Grab and Carousell, Ninja Van has its fingers everywhere. It boasts a client-list that essentially includes every relevant e-commerce company and a host of big corporates that are working to shift their selling to the internet.
It is not as if the Singapore logistics industry is filled with small startups that can’t compete with Go-Jek’s money. The city has its own major players and the home-court advantage creates a significant lead.
For the ideal of competition, Go-Jek’s long anticipated international foray is welcome news in Southeast Asia, but people are placing unreasonable expectations on the company.
It’s important to keep in mind that for the first six months Go-Jek is going to lose to Grab; if we don’t manage our expectations, everyone will just be disappointed.
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