Grab focuses on long-term journey
Super-app to pursue sustainability, profitability and maintain market leadership over the next decade
Amid economic uncertainty and a spending slowdown, super-app Grab projects the industry is moving towards new business practices where price wars become less intense, focusing instead on building customer loyalty and broadening customer segments.
Grab marks 10 years of operation in Thailand next year and wants to pursue sustainability, profitability and maintain market leadership in revenue over the next decade.
Ride-hailing, delivery and financial services are the three segments the firm wants to focus on next year, said Worachat Luxkanalode, country head of Grab Thailand.
Mr Worachat, who took over on Nov 1, said the company has succeeded in changing people's habits regarding ride-hailing and food delivery services via the application in the past decade in Thailand.
Grab has become a common name over the past four years when users think of on-demand services, like "Fab" for laundry powder, he said.
Grab's four-wheel and two-wheel vehicle transport services were legalised in September last year and July this year, respectively.
The company also played a part in generating revenue for restaurants, merchants and drivers, improving their quality of life, Mr Worachat said.
Grab has generated US$8.9 billion in earnings for its restaurant and driver partners in Asean this year.
"Grab remains top of mind for people in the food delivery field," he said.
The company targets to break even in the second half of 2024 regionally, but it may achieve that goal sooner in the Thai market, said Mr Worachat.
Grab is focused on three segments in Thailand: mobility for passengers, delivery (food, grocery and express services), and financial services.
"Food delivery and mobility are the two large businesses in our portfolio," he said.
Grab aims to expand new user groups, including those aged over 55 and young people, encouraging them to engage more in food ordering and ride-hailing services.
The company is also gearing up to provide loans for driver and restaurant partners, said Mr Worachat.
Grab's financial services are instrumental to boost its business ecosystem and create loyalty, he said.
"We are not aiming to gain large profits from interest payments," said Mr Worachat.
Data from driver behaviour and restaurants is gauged via credit scoring as Grab is offering short-term loans for three months.
Drivers can obtain loans of up to 10,000 baht, while restaurants can obtain loans of 50,000-100,000 baht.
"We are careful about bad debt and financial discipline. Lending services are tailor-made for each partner, which is our financial innovation," he said.
"The proportion of Grab's bad debt is lower than that of banks, in the low single digits."
The company recently offered buy now, pay later (BNPL) services in Thailand, giving consumers more flexibility.
"We don't want users to switch to other apps that may offer better promotions, as has happened the past couple of years," said Mr Worachat.
The company is ramping up privileges and BNPL services to increase users' loyalty to the platform. The privileges include GrabUnlimited, a 39-baht monthly subscription package that allows users to receive discounts.
Grab also started collecting a small fee from orders priced less than 50 baht, aiming to encourage users to make larger orders, preferably more than 150 baht, he said.
Mr Worachat conceded small orders are not good business for Grab, which has to offset delivery costs, while multiple small orders lead to higher carbon emissions.
"We will have to find a balance in the food delivery industry, covering platforms, restaurants, users and drivers, by ensuring delivery fees make sense and are acceptable for consumers," he said.
Responding to protests by food delivery drivers who were required to book a time and location before they provide services, Mr Worachat said the approach ensures there are drivers available in all areas, particularly in densely populated locations.
The company adjusted the system after gauging feedback from drivers, he said.
Based on Grab's earnings announcement, it reported cash liquidity of $9 billion at the end of the fourth quarter of 2021.
In the third quarter of 2022, it had cash liquidity of $7.4 billion, but difficult operating circumstances mean the company is adjusting its business to lean towards sustainability, said Mr Worachat.
He said the ride-hailing service was profitable before the pandemic.
With the country's reopening, Grab aims to expand premium services for travellers, particularly in tourist destination provinces.
Despite efforts by newcomers that offer lower commission fees, Mr Worachat said Grab has a strong brand regionally.
He said the company's four-wheel drivers can earn 50,000 baht monthly after deducting a commission fee of 20%, as well as obtaining other financial welfare.
Mr Worachat said Grab is concentrating more on sustainable business growth by thinking about its long-term journey, rather than quick growth at all costs.
The company continues to pursue the GrabForGood project by organising necessary training courses for driver and restaurant partners, following its sustainability commitment.
Mr Worachat, who worked in finance for more than 17 years before joining Grab, said it is important for businesses to have networking.
In the future, platform operators may collaborate similar to an association to support innovation creation and work with the public sector, he said.
"We still compete in business and marketing, but we can lay a foundation for everyone in the industry together," said Mr Worachat.
He told employees at the firm's town hall there will be no layoffs, but Grab will be cautious in recruiting new workers.
"I survived tough times like the Tom Yum Kung financial crisis. With more than 17 years of experience at financial institutions, I stay calm and am embracing a long-term plan over the course of three years," said Mr Worachat.
"I also prioritise portfolio balancing to reduce risks."
He said 2023 will be a big test for the industry.
"We will focus on creating value and pushing for sustainability while ensuring our businesses attain profitability," said Mr Worachat.
"After two years of an economic downturn and a slump in the financial markets, driving business via losses to gain market share may not be a winning formula as seen in the past.
"Thailand has five major players in the market, which is too many. It is hard to speculate how the market will fare, but we are likely to see a turning point in the industry where some players may have to exit."
He said he is banking on Grab becoming a beloved and trusted brand, driving business using good governance and responding positively to all parties, including employees and the public.