Anthony Tan and Tan Hooi founded Grab, an on-demand ride-hailing service at Harvard Business School.
GrabTaxi, founded in 2012 as GrabTaxi, has grown into Southeast Asia’s leading car-hailing, ridesharing, and food delivery services.
Grab operates in Southeast Asia, including Singapore, Malaysia, Indonesia, Thailand, and the Philippines.
Grab acquired Uber’s Southeast Asian business in March 2018, launching it into prominence as one of the region’s most popular cab-hailing apps. Grab has announced that their revenue run rate in 2020 will increase by 70%.
Grab’s business model is quite straightforward. The company typically does not have physical assets or drivers.
Grab’s technology connects passengers in need of a ride with drivers ready to transport them, and Grab will eventually receive a share of the fees.
Grab’s humble beginnings were in Malaysia, where the taxi industry is/was divided between officially licensed taxi drivers and the black market or unlicensed taxi drivers that earn a fortune transporting people about. The task at hand has been very apparent from the start.
Grab Holdings, Southeast Asia’s largest ride-hailing company, proposes to merge with US company Altimeter Growth Capital in a deal worth approximately $40 billion that will allow it to become a Nasdaq company.
There are 187 million Grab users worldwide. It offers many services, including taxi booking, carpooling, shuttle services, bicycle-sharing, and on-demand food delivery.
What is Grab?
Grab is a Southeast Asian app that offers a broad range of products and services, such as food delivery and financial services.
GRAB earns money from commissions from drivers and restaurants, advertising on its platform, and referral fees, payment processing fees, among other things.
Grab business model focuses on providing a product that meets nearly all customers’ daily needs through a super app.
Grab was founded in 2012 and has developed into one of the largest platforms in the world. It has raised more than $12 billion throughout its existence.
|Company Name||Grab Holdings Inc.|
|Founders||Anthony Tan & Tan Hooi Ling|
|Product||Digital payment services and food delivery|
How Does Grab Work?
Grab operates across Southeast Asia and offers catering to various needs, whether insurance or food delivery.
Grab has expanded into eight countries, including Myanmar, the Philippines, Thailand, Malaysia, Vietnam, Cambodia, and Indonesia.
You can choose from a wide range of products based on where you reside. The app offers access to all the offered goods through one single interface.
The idea of the super-app initially gained traction in China, led by Tencent’s WeChat and Meituan.
Grab presently provides the following products:
- GrabRides is a ride-hailing service that enables customers to book taxis and other cars on-demand.
- Customers can place grocery orders through GrabMart.
- GrabFood delivers restaurant meals.
- GrabInsure provides travel and transportation insurance.
- GrabPay is a digital wallet that allows users to conduct in-store transactions.
- GrabFinance offers ‘buy now, pay later options to drivers and customers.
Grab frequently tests new features within the app to see which ones will stick.
Grab works with independent contractors for delivery and mobility services if a customer books a cab or orders food.
You can download and use Grab on any smartphone or tablet running Google’s Android or Apple’s iOS.
Grab Business Model
Grab is an online aggregator with a straightforward but technologically sophisticated business strategy.
This service connects those in need of a ride with individuals ready to provide transportation services via the internet.
Grab deducts a portion of the fare and then leaves the remainder to the driver.
Grab is one of the leading on-demand businesses, offering more than just cab services, with over 6 million trips each day and 2.8 million drivers.
The firm has grown and developed numerous income streams over the years, including hotel booking services, restaurant ordering systems, and supermarket shopping.
How Does Grab Make Money?
Grab earns money from drivers and restaurants, fees associated with processing payments, displaying ads on its platform, and referral fees.
The Grab app became Southeast Asia’s largest mega app just a few years after it began as a bazaar.
The company is developing supplementary products and services (such as investing and personal assistants) to meet the needs of its customers.
Consumers already use the primary app daily, which is a major advantage of the super app model.
Grab, for example, does not need to spend millions of dollars on marketing when it launches a new service like expedited delivery. The service can just be offered through the mobile app.
Grab’s customers have also become used to the company’s quality services. Consumers are, therefore, more likely (at the very least) to try out a new product if one is introduced.
Grab will either deliver the product or service internally or partner with another company, as it does with its insurance products.
Let’s look in more detail at how Grab makes money.
Grab’s Rides section offers a range of transportation options. Several examples include the following:
- JustGrab: taxi or vehicle booking service.
- GrabHitch: users may carpool with other users and save up to 40%.
- GrabBike is a motorcycle ride-sharing service.
- GrabFamily: vehicles equipped with extra safety features.
- GrabPet: ridesharing services that allow for the transportation of pets.
You must have a valid driver’s license, be at least 18 years old, and submit your car for inspection by the company to become a driver.
Driving partners are employed on a contract basis, which means they may work whenever they choose. Grab has created a separate app for its drivers to track their hours worked.
This also implies that drivers are responsible for gasoline, insurance, and any necessary maintenance.
However, Grab has formed alliances with other businesses to assist its drivers. For example, its 2018 collaboration with Toyota enables drivers in the Philippines to obtain preferential financing for vehicle upgrades.
Grab then earns money by deducting a percentage from the total fee, which often hovers around 20%. If a ride costs $10, for example, Grab keeps $2.
Users may also order food and drinks from various supermarkets and kiosks, similar to GrabFood.
Food items (like bread or cookies), beverages (juices or milk), healthcare solutions, personal care products (such as shampoo), and household products (like detergents) are all readily available.
Grab has also begun taking a percentage of sales made by partnering merchants as payment for the service.
It is likely to be a much smaller cut than what GrabFood and GrabRides charge. FMCG margins are typically much smaller than those in other industries.
GrabMart’s prices almost always exceed in-store pricing as well. The margins on products are often higher as a result.
Grab may start sourcing and storing items in its warehouses in the future.
Grab also has small storefronts in countries like Indonesia (via GrabKios). Grab-branded kiosks accept payments through the Grab app.
Kudo assisted traditional merchants such as kiosks in selling digital and physical items via the Grab app in 2017.
GrabFood allows users to order meals from nearby restaurants. It has everything from quick food to healthy options.
Grab partners with driving partners to collect food from restaurants and deliver it directly to consumers.
The delivery fee is paid by the customer. The final price is determined by how far the restaurant is from the customer’s home.
Customers can also tip drivers, similar to GrabRides (100 percent of the tip goes to the driver).
Grab generates revenue from its food business by taking a cut from eateries (called service fees).
The service charge is between 25% and 30%, comparable to other delivery services such as Deliveroo or Foodpanda.
The Grab company also announced in 2019 that it established a cloud kitchen company (called GrabKitchen). Cloud kitchens are co-located with existing restaurant operators.
Because Grab provides kitchen infrastructure, its percentage cut will be much higher than the partners.
GrabPay is a mobile wallet that enables users to make payments for products and services within the Grab app ecosystem and certain in-store merchants.
Grab’s payment division is perhaps the most critical business segment in terms of securing the company’s position as Southeast Asia’s top mobile app.
Many direct and indirect competitors have entered the high-margin payments sector by launching wallets on their sites, including Go-Jek, Lazada, and Shopee.
Grab, on the other hand, has taken this a step further. For example, in December 2020, one of four Singapore businesses was to be granted a digital banking license (Sea, Shopee’s owner, was another).
Grab will expand into more financial services as a fully regulated bank, such as loan issuing and checking account provision.
Nearly 300 million individuals in Southeast Asia do not have access to banking services. As such, Grab has the potential to become many of its customers’ first bank account.
Grab may potentially provide auxiliary services like loans, insurance, and financial goods in the future.
The primary benefit is that Grab collects extensive data on a user’s purchasing patterns (and more), enabling them to adapt their product to the user’s unique demands.
GrabPay earns the company a considerable amount of money through Grab. GrabPay retailers charge a modest fee of roughly 1% on each transaction.
Grab processes these payments in collaboration with companies such as Adyen and Stripe. Additionally, Grab has partnered with Mastercard to create its physical debit cards.
When you use a debit or credit card to make a purchase, an interchange charge is imposed. Grab and Mastercard, as the card’s issuer, will then likely share the charge.
Additionally, Grab has introduced a ‘buy now, pay later option that enables users to pay for purchases in four payments.
Users who fail to pay their installments on time may be charged a penalty of about 4% if they fail to use the service.
The Grab app allows users to request transportation of products in addition to people and food.
GrabExpress can deliver letters to another nearby address, for instance. The size of the delivery determines whether motorcycles or automobiles are used to transport it.
Shipments are also insured (up to 500 SGD in Singapore) and trackable in real-time during delivery.
Grab deducts a portion of the total fare, like GrabRides. The fees are substantially comparable to those charged by a ride-hailing service.
Grab Wallet lets you earn points for spending on rides, food, and payments.
You can use these points to purchase other items (like headphones) or get discounts (30 percent off at certain restaurant partners).
Grab uses a reward system to encourage customers to return to its platform regularly. The assumption is that consumers will eventually become so accustomed to the platform that switching will become prohibitively difficult.
Grab earns money through its rewards program in addition to boosting customer loyalty. Its program partners almost certainly pay the firm a referral fee for bringing in new customers.
The GrabAssistant service provides many different tasks on-demand in some countries, such as Thailand.
Users can schedule helpers to pick up laundry, buy pets food, garden materials, or medicine, among other tasks.
Grab takes a portion of the volume of orders once again. A consumer may also tip the driver who delivers the package.
Grab has collaborated with local insurers to offer a variety of coverage to both passengers and drivers.
Several insurance choices are available, including travel insurance (if you cancel your trip) and accident coverage during a Grab journey.
Customers purchase insurance during the booking process. Grab has contracted with insurance underwriters to get coverage, so it is reasonable to conclude that fees are split between Grab and its insurance partner.
Both Grab and the insurance underwriter have access to millions of data points regarding previous journeys.
They can, therefore, accurately predict the likelihood of an accident, making these types of insurance more profitable.
GrabGifts are virtual gift cards that users can give to friends and family. Grab’s services include transportation, food delivery, shopping delivery, and fast delivery using the card.
GrabAds is a solution that allows third-party companies to advertise on Grab’s platform.
Grab’s ecosystem is used by millions of people every day. It also keeps track of users’ purchase patterns, favorite destinations, and other preferences.
Grab reports that more than 60% of its users complete a transaction within a single session. Thus, advertisers could reach a highly focused and ready-to-purchase audience.
Grab has previously partnered with marketers such as Nike, Apple, McDonald’s, Disney, Unilever, and Coca-Cola.
In all likelihood, these marketers pay to Grab on a cost-per-click (CPC) basis. An advertiser’s budget is reduced anytime he clicks on an advertisement when the CPC is pre-negotiated.
Grab also advertises offline, for example, by placing samples in vehicles or attaching stickers to vehicles.
There is a good chance that both parties will agree on a certain fee for advertising for a certain time.
What is the Funding and Valuation of Grab?
Crunchbase reports that Grab has raised $12.5 billion in debt and equity capital across 34 rounds.
Notable investors such as Tiger Global Management, SoftBank, GGV Capital, Yamaha, Microsoft, HSBC, Vertex Ventures, 500 Startups, and Toyota have invested in Grab.
Grab is seeking a valuation of about $40 billion from its SPAC merger, which is expected to close at the end of the year.
What is the Revenue of Grab?
Grab announced $1.6 billion in revenue for the fiscal year 2020. Meanwhile, the corporation lost $800 million within the same period.
Who is the Owner of Grab?
Grab founder and CEO Anthony Tan would own only 2.2 percent of ordinary shares following the SPAC merger with Altimeter Growth.
However, the SPAC agreement vests him with 60.4 percent of the voting power in the newly established firm (via Class B shares). The voting power of Class B shares is 45 times that of ordinary shares.
Tan, as such, can outvote all other investors and board members, granting him total decision-making authority.
This arrangement is not uncommon, particularly in founder-led businesses. For example, Mark Zuckerberg, the CEO of Facebook, also has the lion’s share of his company’s voting power.
Hooi Ling Tang, the second co-founder and president of Ming Maa, will control 1.1 percent of ordinary shares following the transaction.
The SoftBank Vision Fund (18.6 percent), Uber (14.3 percent), Didi Chuxing (7.5 percent), and Toyota are Grab’s major shareholders (in terms of ordinary shares) (5.9 percent).