Can Grab succeed as the Southeast Asia super app?

Yi Hong Poo
Nov 16, 2019 · 9 min read

Super apps like Meituan-Dianping, WeChat, and Alipay are super common in China and they are about to invade Southeast Asia.

The super app life

The alarm rings. You start the day by replying to a few messages on WhatsApp and Facebook Messenger. You log into Instagram to see what your friends are up to. Then, you realize you are late for work and you quickly book yourself a ride on Uber to get to work. At work, the weather is cold and you decide to order some food on GrubHub instead of going out to eat. The day ends and you head to the supermarket to buy some groceries. You pay via Venmo. On the way back home, you realize you forgot some items and you order the rest on Amazon.

This could be your life if you are outside of China. If you are in China, you can do everything on Wechat. WeChat has evolved beyond China’s de facto messaging app and has become the all-in-one app for users to access an innumerable number of services including paying utility bills, buying movie tickets, ordering food, shopping online, booking hotels, making a payment, and transferring money to your friends. To top it off, WeChat is not the only super app around in China.

China has emerged as the hotbed for super apps or apps which can do everything in one app. While the rest of the world rely on different apps for different purposes, Chinese people rely on one super app for many functions. Once derided as copy-cat apps, these super apps are now being seen as a glimpse of the future.

The future is here

WeChat, Alipay, and Meituan-Dianping are the three most widely used super apps in the world. Most apps have only a single main function. Some apps are closely integrated with its cousin apps with related functions. A small group go beyond that and develop multiple functions within the same app. However, China’s super apps go beyond all that and even allow third-party companies to develop lightweight mini programmes which can run within these apps.

Source: S&P Global (https://www.spglobal.com/marketintelligence/en/news-insights/blog/china-leads-rise-of-mobile-super-apps)
  1. WeChat (微信)

WeChat is the most popular messaging app in the world used by over a billion monthly active users. WeChat started out as a messaging app but slowly added more and more features. It was the first to pilot the mini-app feature. WeChat also has official accounts which are channels for people to disseminate information. That feature has radically changed the way information is consumed in China by building another closed ecosystem of information outside of Baidu. Its Moments feature is a mix of Facebook and Instagram where people are able to show their social feeds. WeChat Pay is one of the two dominant digital wallets in China together with Alipay.

WeChat Interface. Source: China Channel (https://chinachannel.co/wechat-stories-everything-you-need-to-know/dsafdasfdads/)
Source: DMB (http://dmb-shanghai.com/bat/wechat-from-messaging-app-to-super-app/)

2. Alipay(支付宝)

Alipay under Ant Financial started out as a payments solution affiliated with Alibaba. In Early 2019, it announced that it has surpassed 230 million daily active users and 120,000 mini-apps. However, this figure still pales in comparison to WeChat who has 200 million daily users but one million mini-apps. For comparison, Apple’s App Store has around two million apps.

Alipay’s core function is a wallet and its top categories of mini-apps provide services with a heavy transaction volume such as retail, paying for utilities, and travel booking.

Source: Ant Financial ( https://pt.slideshare.net/Emerce/emerce-retail-18-payment-for-retail-big-changes-ahead-xiaoqiong-hu)

3. Meituan-Dianping (美团点评)

Meituan started off as a group-buy business like Groupon. Meituan eventually merged with Dianping, a Yelp-like service, and became a one-stop-shop service and information provider. It allows users to book movie tickets, order food online, book hotels, read reviews about food and services, and purchase air tickets. The company has surpassed Ctrip to become the number one player in China’s online hotel booking business.

Source: GGV (www.hans.vc)

Why does Super App work? A Case Study of Meituan-Dianping

Super apps increase user stickiness and enable the company to move from a search based shopping to a recommendation based shopping.

When you book an air ticket on Meituan, it knows that you are going to a destination either for holiday or for work. Then, Meituan is able to recommend you hotels based on your profile. It is further able to recommend you places to visit and restaurants to go to base on your previous restaurant searches. Meituan is able to build up a very detailed profile of the user including his or her likes and dislikes through the many avenues it can collect information. With that, Meituan is able to recommend more and more services to the user.

Taobao is a good example of a product with a very strong recommender system. We can see that the recommendation generated revenue has overtaken the search revenue in 2018. Compared to three years ago in 2015, the recommendation generated revenue was only a fraction of the search revenue. Taobao is now able to recommend suitable products to people to induce more purchases. If you have spent time on Taobao, you definitely would have bought some frivolous stuff recommended by Taobao which on hindsight you might feel you did not have a need for.

Source: China Internet Report 2019 by SCMP

Super app offers multiple points of engagement and more advertisement channels

The increase in services in the super app is also the beginning of a virtuous cycle. As Meituan acquire more services, it is able to entice more users which brings in more opportunities for advertisement revenue. More merchants are willing to come on board when they see the daily active user increase hence perpetuating the virtuous cycle.

In the very competitive food delivery sector, we can see that Meituan Waimai is starting to pull ahead of its competition. Meituan Waimai has many access points including the Meituan app, Dianping app, WeChat, and QQ which all contributed to its traffic.

Source: Pandaily (https://pandaily.com/meituan-leads-in-chinas-food-delivery-market-followed-by-ele-me-and-baidu/)

As an advertising platform, Meituan is also able to offer stronger value compared to traditional online advertising mediums such as Baidu. It offers many channels including group discounts, reviews, rides, and online bookings. All of these allow merchants to cross-sell different solutions.

Source: GGV (www.hans.vc)

“I don’t have space left on my phone”

Source: OSX Daily (http://osxdaily.com/2014/06/04/iphone-cannot-take-photo-not-enough-storage-workaround/)

Have you ever encountered the issue of not having enough storage on your phone? You might own a US$1350 512GB iPhone 11 Pro and you have no issues with storage. But people in Southeast Asia rely on low-end smartphones from brands like Xiaomi, Oppo, and Samsung. According to Canalys, Chinese smartphone brands take up 62% of Southeast Asia’s 30.7 million shipments. More than 75% of these shipments consist of sub-US$200 models. These phones have lower specifications and more importantly lower storage space. Hence, a super-app solves people’s storage issues. Super-app provides all the features within one app, saving users precious space on the phone.

Source: Mobile Marketing Magazine (https://mobilemarketingmagazine.com/chinese-phone-makers-are-capturing-most-of-the-southeast-asian-market)

Southeast Asia — the next technology battlefield

Two consistent themes stand out in the technology and investment landscape — Southeast Asia’s rapid growth in the internet economy sector and China’s export of innovative business models.

First, Southeast Asia’s internet economy is about to experience the same kind of growth which China did many years ago. According to Google and Temasek’s SEA Internet Economy Report 2019, Southeast Asia will experience rapid growth both in terms of internet users and the gross merchandise value across online travel, e-commerce, online media, and ride-hailing sectors. The value of the internet economy has already tripled between 2015 and 2019 with a compounded annual growth rate of 33%.

Source: Google and Temasek’s SEA Internet Economy Report 2019 ( https://www.blog.google/documents/47/SEA_Internet_Economy_Report_2019.pdf)
Source: Google and Temasek’s SEA Internet Economy Report 2019 ( https://www.blog.google/documents/47/SEA_Internet_Economy_Report_2019.pdf)

Second, China developed many innovative business models like the super-app concept. Global technology companies are replicating these successful concepts from their Chinese counterparts. In the next ten years, China will become an innovation powerhouse and the world will move from “Made in China” to “Copy from China”.

Source: China Internet Report 2019 by SCMP

Grab is one example of a Southeast Asian company learning from its Chinese counterparts in terms of business model innovation.

Grab started out as a ride-hailing company in 2012 and it mainly focused on expanding to the countries like the Philippines, Singapore, Thailand, Indonesia, and Vietnam to offer its services in the first three years. Grab also launched Southeast Asia-centric ride-hailing solutions such as GrabBike.

2016 was a key year for Grab as it expanded into mobile payments with GrabPay and it also moved into the food delivery space with GrabFood to compete with UberEats. The investment into mobile payment was not an intuitive move for Grab. Ming Maa, President of Grab, recalled that it took many rounds of convincing before Grab decided to do it.

I still remember at the time our board director, Jixun, would come to our board meetings every quarter. And every quarter he would remind us that payments creates a real competitive advantage in terms of customer loyalty, in terms of improved customer spend. And so really the right way to think about payments wasn’t as a separate independent business line, but really as something that makes the core business stronger and better.

And so I think after about four or five board meetings where Jixun kept on repeating the same thing, I think we finally figured out he was absolutely dead-on, and we launched in 2016.

Source: SCMP (https://www.scmp.com/tech/article/2157177/how-grabs-ceo-steered-it-garage-malaysia-southeast-asias-most-valuable-tech)

Challenges

While the Southeast Asian market has a population size of 640 million, it is still a very fragmented and non-homogeneous market. Each country is relatively small and very different from each other. Grab will have to go really hyper-local and understand really well the idiosyncrasies of each of the different market. This will pose a challenge to its resources.

As Grab moves ahead in its journey to become a super app, it will continue to face numerous challenges. While the super app concept might be intuitive to the digitally savvy Chinese consumers, it might not be for the Southeast Asian market. Nonetheless, the redeeming factor about Southeast Asia is the young and affluent digital native middle-class population. These people grew up in a mobile-first environment and they can learn very quickly.

Southeast Asia lacks a lot of the digital infrastructure which allows a super app to thrive. Grab had to create all these digital infrastructures and this allowed them to offer these services to other people in the form of APIs. That was the genesis for thinking about the super app.

As Grab continues to embark on its super-app journey, users should expect to see more and more services slowly rolled out underpinned by its financial payment infrastructure. Grab has announced many key partnerships over the last two years:

  1. Financial — Grab Financial has built the largest payment ecosystem in Southeast Asia with e-money licenses in six countries in Southeast Asia. It offers drivers micro-insurance in Malaysia and personal loans in the Philippines.
  2. Hotel bookings — Grab partnered with Agoda and Booking.com to allow users to compare prices and book hotels and apartments.
  3. Content — Grab partnered with HOOQ to allow users in Singapore to access on-demand streaming of Hollywood blockbusters, regional favourites, and free-to-air content through its app
  4. Healthcare — Grab formed a joint venture partnership with China’s Ping An to provide integrated medical services such as consultation, medicine delivery, and appointment bookings through an online platform. It also partnered with WhiteCoat to deliver medicine via GrabExpress, Grab’s courier and parcel delivery service
  5. Offline — Heineken will leverage Grab’s mobility and delivery services to meet last-mile logistics needs and ramp up its sales and distribution channels in the region.
  6. Technology — Grab partnered with Microsoft to train students and help its drivers acquire digital literacy skills

Grab’s expansion strategy has been focused on partnering with the best-in-class service providers to add these services onto its platform. As it evolves, it might even consider opening up a third party mini-programme platform to allow other users to tap its digital infrastructure much WeChat, Alipay, and Meituan-Dianping.

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