In one of the most unexpected twist in the ride hailing space. Grab managed to beat out Uber in what many expected early on to be a culling of the local player. And to be clear, when they both started battling it out in Singapore, this really was a local battle. Grab was yet to make a dent in the SEA region, and Uber was already trudging along in their regional expansion. So what happened? How did David actually take down Goliath?
The expectation after Uber lost out to Didi in China, was that this retreat was going to be the last time Uber would ever have to fall on its sword and accept defeat. This is Uber after all, they invented the space! As a general trend, most dominant, ‘monied’ global players such as Amazon, do well to enter a new market and first focus on decimating and canibalising the business of their local competitors. They bring global learnings, global best practices and dominate from day one.
Uber did not do that. In this case, they chased profitability (Lion City Rentals as an example was a slamming success and made Uber one of the single largest car owners in Singapore) as opposed to market position. This gave Grab a window, small as it was initially, to find its footing and counter.
The key success factor for Grab - An in-app wallet that enabled an ecosystem!
Grab’s wallet isn’t perfect (not by a long shot), but it was a proof of concept that has shown substantial merit in how a seemingly inconsequential addition of an embedded wallet can shift the tides in a highly competitive environment. I have watched, and used the Grab wallet to see how they were able to seed their wallet into a central features within their platform.
Initially, you could simply load your Grab wallet, and get promotional ride pricing if you paid using the locked in stored value. Grab was able to evolve the literacy of its users with respect to their wallet by staging the features in as opposed to dropping them all at once (whether that was part of a grand plan or just a matter of their technology roadmap playing catchup). The features that followed included sending funds to other peoples’ wallets, and using your Grab wallet for promotional pricing at local merchants, like Starbucks.
The unfortunate fact is, all this while, Uber did nothing. What Grab did with their wallet was not spectacular, and they will see just how challenging it is to leverage their wallet when Go-Jek moves out regionally, as they are longer-in-the-tooth in the wallet ecosystem game than Grab.
Had Uber simply implemented a wallet regionally, Grab would not have won the day, that I am sure of. What Grab did with their wallet was to simply get users to commit funds to their closed loop wallet. When the use case for that wallet extended beyond just ride hailing, people began to store more funds in their Grab wallet. Those funds were now locked in, and the logic was simple. If you have stored value in a wallet, and that wallet among other things allows you to get regular promotions on ride hailing services, you will use it over a competitor that does not offer any competitive alternative.
So what comes next? Yes, Grab is in for a rough ride now that Go-Jek moves beyond Indonesia and regionally across SEA. But for Uber, this is just the beginning. There are lucrative markets for them, such as South America, and if they don’t pay attention, the Grabs, Go-Jeks, and Careems of the world (all with in-app wallets) will be coming for those lucrative markets, and the longer Uber holds out on developing a global wallet strategy, the deeper the valley of despair will grow for them.